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Monetary And Fiscal Policy - Paper

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.

The monetary policy is the act of regulating the money supply
by the Federal Reserve Board of Governors, currently headed by Alan
Greenspan. 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 “Fed” has three tools ...

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new reserve requirement.

The tool known as open market operations influences money and
credit operations by buying and selling of government securities on
the open market. This is used to control overall money supply. If
the Fed believes there is not enough money in circulation, then
they will buy the securities from member banks. If the Fed believes
there is too much money in the economy, they will sell the
securities back to the banks. Because it is easier to make gradual
changes in the supply of money, open market operations are use
more regularly than monetary policy.

When member banks want to raise money, they can borrow from
Federal Reserve Banks. Just like other loans, there is an interest
rate, or a discount rate, the third tool of the 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 ...

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Monetary And Fiscal Policy. (2008, August 27). Retrieved December 23, 2024, from http://www.essayworld.com/essays/Monetary-And-Fiscal-Policy/88983

"Monetary And Fiscal Policy." Essayworld.com. Essayworld.com, 27 Aug. 2008. Web. 23 Dec. 2024. <http://www.essayworld.com/essays/Monetary-And-Fiscal-Policy/88983>

"Monetary And Fiscal Policy." Essayworld.com. August 27, 2008. Accessed December 23, 2024. http://www.essayworld.com/essays/Monetary-And-Fiscal-Policy/88983.

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PAPER DETAILS

Added: 8/27/2008 11:55:17 AM
Category: Economics
Type: Premium Paper
Words: 925
Pages: 4

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