The monetary and fiscal policies essay

One of the main responsibilities of the Federal Reserve System is to regulate the money supply so as to keep production, prices, and employment stable. The discount rate is not used as frequently as it was in the past, but it does serve as an indicator to private bankers of the intentions of the Fed to constrict or enlarge the money supply.

If it is raised, then banks may have to collect on some loans to meet the new reserve requirement. Both policies have their strengths and weaknesses, some situations favoring use of both policies, but most of the time, only one is necessary. If the Fed believes there is too much money in the economy, they will sell the securities back to the banks.

The reserve requirement is the percentage of money that the bank is not allowed to loan out. The main point of fiscal policy is to There are no delays from congress.

If it is lowered, banks are required to keep less money, and so more money is put out into circulation theoretically. There are no delays from congress. One weakness is that tight money policy works better that loose money policy.

Another problem is monetary velocity. The changing of tax rates, and changing government spending.

The second way to influence the money supply lies in the hands of the government. Just like other loans, there is an interest rate, or a discount rate, the third tool of the monetary policy.

Tight money works on bringing money in to stop circulation, but for loose policy to really work, people have to want loans and want to spend money. One weakness is that tight money policy works better that loose money policy. Tight money works on bringing money in to stop circulation, but for loose policy to really work, people have to want loans and want to spend money.

If the discount rate is high, then fewer banks will be inclined to borrow, and if it is low, more banks The monetary and fiscal policies essay theoretically borrow from the reserve banks. The benefits of the monetary system are that it can be enacted immediately with quick results.

The number of times per year a dollar changes hands for goods and services is completely independent of the money supply, and can sometimes contradict the efforts of the Fed.

If it is lowered, banks are required to keep less money, and so more money is put out into circulation theoretically. The reserve requirement is the percentage of money that the bank is not allowed to loan out. The "Fed" has three tools to manipulate the money supply. When member banks want to raise money, they can borrow from Federal Reserve Banks.

The fiscal policy consists of two main tools. Just like other loans, there is an interest rate, or a discount rate, the third tool of the monetary policy. The second way to influence the money supply lies in the hands of the government with the Fiscal Policy.

One of the main responsibilities of the Federal Reserve System is to regulate the money supply so as to keep production, prices, and employment stable. The monetary policy is the act of regulating the money supply by the Federal Reserve Board of Governors, currently headed by Alan Greenspan.

Because it is easier to make gradual changes in the supply of money, open market operations are use more regularly than monetary policy. If the discount rate is high, then fewer banks will be inclined to borrow, and if it is low, more banks will theoretically borrow from the reserve banks.

The monetary policy is the act of regulating the money supply by the Federal Reserve Board of Governors, currently headed by Alan Greenspan. If the Fed believes there is not enough money in circulation, then they will buy the securities from member banks.

The most powerful tool available is the reserve requirement. This is used to control overall money supply.

Monetary and Fiscal Policy

The monetary policy is a good way to influence the money supply, but it does have its weaknesses. They are the reserve requirement, open market operations, and the discount rate. They are the reserve requirement, open market operations, and the discount rate.Fiscal policy involves taxation and public spending, and expansionary fiscal policies are lower taxes revenue and increased expenditure, which boost economy.

The other option is cutting spending and boosting the tax revenue. Monetary and Fiscal Policy Essay examples Words | 6 Pages Monetary and fiscal policy and their applications to the third world countries with a huge informal sector This essay seeks to explain what are monetary and fiscal policy and.

Describe the difference between monetary and fiscal policy in the UK and explain how such policies can be used to achieve different macroeconomic government objectives. The main and most obvious difference between monetary and fiscal policy is that monetary policy is set by the central bank and fiscal policy is implemented by the.

Monetary and Fiscal Policy. The Monetary and Fiscal Policies, although controlled by two different organizations, are the ways that our economy is kept under control. Both policies have their strengths and weaknesses, some situations favoring use of both policies, but most of the time, only one is necessary/5(1).

monetary and fiscal policy Essay example - Monetary and Fiscal Policy Monetary policy is the plan to expand or contract the money supply in order to influence the cost and availability of credit. Fiscal policy is another tool for the government basically spending and taxing, or borrowing money.

Monetary and fiscal policy and their applications to the third world countries with a huge informal sector This essay seeks to explain what are monetary and fiscal policy and their roles and contribution to the economy.

Download
The monetary and fiscal policies essay
Rated 5/5 based on 75 review