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Essay / Research Paper Abstract
A 5 page paper that discusses the central banks of the U.S. and Australia. Specifically, the writer discusses the three most common monetary policy instruments, i.e., actions the central bank can take that will affect the economy, and expansionary and contractionary policies. Why both Australia and the U.S. adopted expansionary policies in 2001 and what might cause a move to contractionary policies. Examples are given. Bibliography lists 6 sources.
Page Count:
5 pages (~225 words per page)
File: MM12_PGmnpol.rtf
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Unformatted sample text from the term paper:
are: 1. The Discount Rate: Discount rates drive interest rates (Smith, 2001). The discount window is the time when the federal reserve bank lends money (Smith, 2001). The window is
a critical part of the reserves activities. As an example of how this is used, the events of September 11, 2001 had a devastating effect on the financial world. The
Federal Reserve turned on the discount window and on September 12, $455.28 million was borrowed at the discount window (Smith, 2001). That compares to the $89 million that was borrowed
at the window in all of August 2001 (Smith, 2001). Changes in the discount rates affect the economy, for example, an increase in the discount rate means that depository institutions,
like banks, will pay more for the money they borrow and, in turn, so will businesses and consumers (FRB of Richmond, nd). Higher rates also mean that financial institutions will
lend less money to the public and will be more restrictive in terms of who borrows(FRB of Richmond, nd). When the rates drop, financial institutions ease up and offer
more (FRB of Richmond, nd). 2. Open Market: this means that the bank buys securities from other dealers and banks in the open market (Smith, 2001). The Federal Reserve credits
the accounts of the dealers and banks from whom they purchase securities (Smith, 2001). This is one way to put money into the financial system (Smith, 2001). Operations in this
arena are either defensive or dynamic (FRB of Richmond, nd). Defensive operations are intended to counter other factors that influence reserves (FRB of Richmond, nd). Dynamic operations have an
end goal of either easing or tightening credit (FRB of Richmond, nd). 3. Reserve Requirements: this is the percentage of deposits that financial institutions, like banks, must hold
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