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Essay / Research Paper Abstract
A 5 page paper that discusses two primary issues relative to the Federal Reserve Bank - buying and selling securities and the reserve requirement ratio. The paper opens with a brief discussion of the Bank's goals and purpose. Bibliography lists 5 sources.
Page Count:
5 pages (~225 words per page)
File: MM12_PGfedrs3.rtf
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Unformatted sample text from the term paper:
bank regulatory responsibilities" (Saxton, 1997). Because the Federal Reserve is the lender of last resort, it has the power to stabilize the financial system of the nation (Saxton, 1997). The
goals of the Federal Reserve Bank are to ensure "sustainable growth, price stability" and to maintain the "integrity of the countrys financial system" (Smith, 2001, p. ITEM01276019). The primary strategies
the bank uses to stabilize the nations economy include discount rates or discount windows, the reserve department and the open market operations. When the bank uses the "open market,"
it means that it buys securities from other banks and dealers on the open market. The Federal Reserve then credits the accounts of the financial institutions from whom they purchase
the securities. Buying securities in this way is one way the Federal Reserve is able to put money into the nations financial system (Smith, 2001). The open market is usually
considered to be the Federal Reserves most flexible tool in stabilizing the economy and carrying out monetary policy. As already stated, the Reserve buys and sells U.S. government securities in
the secondary market. Among other things, this act adjusts the levels of reserves in the banking system. The Bank is also able to manage money supply growth. Using the option
to buy and sell securities allows the Fed to "offset or support seasonal or international shifts of funds and thereby influence short-term interest rates and the growth of the money
supply" (Equity Analytics, Ltd., 2001). The discount rates established by the Federal Reserve Bank are directly related to the interest rates available to businesses and consumers. In other words,
the Federal Reserves discount rates drive interest rates in the countrys financial system. The discount window refers to a period of time when the Federal Reserve Bank lends money.
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