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Essay / Research Paper Abstract
This 5 page paper answers four questions. Firstly, the paper looks at the three main tools that the Federal Reserve may use to control the money supply in the US. The second question is the shortest, and shows how the reserve balance on T-accounts is calculated. The third question outlines the variables that impact on the demand for money, and the last question looks at expansionary monetary and fiscal policies, what they are and how they operates and then uses the IS-LM model to illustrate the effects. The bibliography cites 3 sources.
Page Count:
5 pages (~225 words per page)
File: TS14_TEmonqus.rtf
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Unformatted sample text from the term paper:
the Federal Reserve under the Federal Reserve Act of 1913 (Federal Reserve, 2004). There are three main tools that are used; the open market operations, the discount rate and the
last is the reserve requirements (Federal Reserve, 2004). Looking at each individually we can see how and why they impact on the economy. The open market operations are perhaps
the main tool. This is the decision on the sale and the purchase of securities, which equates to the setting of interest rates for federal and treasury securities (Federal Reserve,
2004). The impact is due to the way this determines the rate obtained by depositors investing in the federal reserve. These depositors are the institutions that use the
overnight rates. There is a dominoes effect as the higher the interest rates being obtained this will then pass down the supply chain. The federal funds rate can therefore impact
on the economic conditions due to the way it increases or decrease the flow of money by adjusting the interest rate. The second tool is the setting of the discount
rate. This is the rate that the federal reserve will use to charge the banks when it lends them money. This also includes other financial institutions. Here there will be
three windows; the primary credit, the secondary credit and seasonal credit (Federal Reserve, 2004). The primary credit rate is for
short term loans, usually only an overnight loan, and are given to institutions which met the required security criteria. This is set above the short term lending rate, and often
the term discount rate will mean the primary rate. The secondary rate is above the primary rate and is available to institutions that do not meet the security criteria
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