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Essay / Research Paper Abstract
A 5 page paper that begins with a discussion about what monetary is and what it does. The paper also responds to these topics: how is money created, what the Federal Reserve is and what tools it uses in response to macroeconomic events, such as unemployment, interest rates and economic growth, and why GDP is so important. Bibliography lists 4 sources.
Page Count:
5 pages (~225 words per page)
File: MM12_PGfdmn8.RTF
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Unformatted sample text from the term paper:
the availability of money. Monetary policy is used to influence economic activity within the country so that monetary policy is commensurate with the governments political objectives. The goal of
monetary policy is to achieve macroeconomic stability. Such stability would include low inflation rates, low unemployment rates, and economic growth. It would also include growing the gross domestic product (GDP).
Monetary policy is administered by a nations central bank; in the United States, that bank is the Federal Reserve Bank. Money is created in two different ways. First, money
can be created by borrowing it and then, spending it. Benson (2004) explains: "Money is literally borrowed and spent into existence." The other way is for the central bank to
simply print money, which Benson (2004) describes as creating money "out of thin air." Over the last decade, money has been created primarily in the private sector as players borrow
and spend the money (Benson, 2004). The central bank, i.e., the Federal Reserve Bank, can "peg the nominal level of short-term interest rates and [it] can purchase assets, such as
government debt, with the newly printed money" (Benson, 2004). When the Fed lowers interest rates, it encourages businesses and consumers to borrow and spend more money (Benson, 2004). Over
the past two or three decades, there has been a great deal of money created from borrowing and spending. Consider the level of consumer credit card debt versus savings. A
lot of the first and very little of the second. Also consider the enormous deficit in the U.S. national budget. The government is spending through borrowing billions of dollars each
year. The Federal Reserve cannot continue to print so much money out of thin air and the United States Treasury cannot continue to continue borrowing and spending. GDP, or,
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