Sign Up Now
Get instant access to over 1 million+ study documents
OR
Already registered? click here to login
By creating your account, you agree to our terms of service, privacy policy and student honor code.
Monetary policy and fiscal policy are the two main ways in which governments influence the health of the economy. Monetary policy is conducted by central banks, while other branches of the government are responsible for fiscal policy. The Federal Reserve illustrates the three major ways in which is uses monetary policy. Monetary policy reflects the amount of money that is in the economy, which in turn influences the health of that economy. The Fed sets monetary policy in line with seeking a stable rate of growth, controlled inflation and a healthy rate of job creation.The primary means by which the Fed implements monetary policy is through open market transactions. These are the buying and selling of Treasury securities, or government debt. If the Fed wishes to increase the amount of money in the economy, it buys securities and if it wants to decrease the amount of money in the economy it sells them. Usually these are short-term securities, but there are longer-term Treasuries on the market as well.
The discount rate is another means by which monetary policy is enacted. According to the Federal Reserve website, "the discount rate is the interest rate Reserve Banks charge commercial...
Thus, the discount rate is literally the cost of money. The higher the cost of money, the less money the banks are willing to lend out. Basically, businesses and consumers will spend less if money is more expensive, and when banks pay more for money, they charge more for it. Thus, the discount rate influences the retail rates, which in turn will influence the amount of activity in the economy.
The third means by which the Federal Reserve influences monetary policy is the reserve requirements. These are the requirements for financial institutions with respect to how much of their deposits they must hold back. A bank takes in deposits, and makes its money by lending that money out again. The reserve requirement is theoretically a buffer that the bank cannot lend out, for safety reasons. The central bank seldom changes the reserve requirements, but if it does, that either frees up money for the bank to lend (spurring economic growth) or causes the bank to call in loans (cooling the economy).
Fiscal policy is entirely different from monetary policy, but it can also influence the overall health of the economy. Fiscal…
At a general level, the fiscal policy decreased the individuals' purchasing powers, which subsequently translated into lower levels of consumption. In other words, people bought commodities at higher prices, but they lowered their purchase volumes. The government will probably end up with the same level of federal revenues, but their collection structure will suffer modifications. In other words, the same amount of taxes was once collected through lower taxes and
Monetary vs. Fiscal Policy With the onset of the "Great Recession" and its aftermath, U.S. Government institutions unleashed a torrent of fiscal and monetary policy activities designed to forestall an economic calamity. Two years after the official end of the recession in July 2009, fiscal and monetary policy levers are still active in their attempt to jumpstart an economy that has been anemic in its growth rates and slow to add
Fiscal policy of the United States is one of increased spending to help stimulate the economy. A good example of this can be seen with the President's proposal to spend $447 billion on encouraging employers to hire new workers and through government infrastructure projects. While at the same time, it is providing assistance to the states to help hire police officers, fireman and teachers. These different elements are important, because
Even the state needs resources, so it may decide to borrow money from the bank. JP Morgan could also emit bonds for the government, and a nice fee could be made out of that. However, should government spending be excessive, this could lead to inflation, which would seriously affect the bank's activity and profit margins. The ways in which JP Morgan would feel the effects of fiscal policies are countless.
Given that the woman does already own her own property, this greatest capital for self-employment justifies the long-term prospect of self-employment. 3. Miami-Dade County and the city of Miami have for a number of years remained somewhat ahead of state and nationwide unemployment levels. But as the recession drags on into its 18th month, it is clear that Miami is no longer insulated from the patterns impacting the rest of the
Decisions and policy changes have implications all around the globe, not just in the nation that makes these changes. Improving a nation's current account, which is a product of a depreciating dollar where investors move their money to foreign currencies and trade products, also helps to boost the legitimacy and perceived strength of an economy. In Canada, this has the effect of depreciating the currency and boosting aggregate demand, which