Essays on Money Supply

The Federal government has limited options to address economic issues. These are generally described as “Fiscal policy” and “Monetary Policy.” In the most general terms, fiscal policy involves government tax and spend programs. The underlying theory is that tax cuts increase consumers spending ability by leaving consumers with more money and government spending provides a more direct stimulus by injecting money into the economy. Fiscal policy is generally identified under the popular “Keynesian Economics” label. Monetary policy, on the other hand, involves the central bank (the Federal Reserve Bank system, or “the Fed”) “adjusting” the money supply through interest ...

Abstract

Individuals and business organizations with investment potential or the desire to become investors often find themselves having limited capital to undertake the desired projects. Additionally, most investors are often confused when carrying out analysis to assess the risk of the various portfolio in which they intend to invest their resources. The governments have developmental projects that require more financial resources than their revenue due to budget deficits. Having excess money in the circulation is dangerous to an economy because it results in excess aggregate demand that produces inflationary gaps. As such, the government must regulate money supply to ensure ...

Abstract

The Great Depression during the 1930s was referred to as the most severe economic downturn that affected the United States and the global economy. The depression lasted for almost a decade, and some economists and monetary scholars blamed the failure of the banking institutions to come up with effective policies to maintain a sound standing. The banks were not sufficiently prepared to deal with erratic economic movements. Consequently, there were also those who argued that the Fed should be blamed for the economic recession because of their failure to adapt sound monetary policies. It was pointed out that the ...

Introduction

The Petrochemical industry in the ministry of energy has been focusing on the oil prices change and how it influences the economy. The oil demand comes from the petrochemical industry whereby energy generation helps in manufacturing and production industries. These industries help in economic transformation through improving country’s GDP. As the source of energy, oil in the petrochemical industry has been influenced by inflation and unemployment, interest rates and exchange rate. These factors influence the government spending, hence affecting the importation of oil from the producing countries such as Saudi Arabia. The oil prices as a result of ...

Money and prices in the long run and open economies dictate the financial market. As such, that is why factors such as domestic variables and foreign monetary policies are over-emphasized. Demand for money is thus affected by the domestic variables, which include interest rates, price expectations, and permanent income, among others. As such, this paper explores the financial market to reveal the viable strategies the US can adapt to secure reliable money and prices in an open economy on a long-term basis.

The state of US Financial Market

Over the years, the economy of the US has been in good shape, especially when compared to ...

Abstract

The US economy thrives on the proper functioning of the monetary policy of the government of the day. Interest rates, inflation and recession are all related and happen to influence proper functions of the government warranting their clear understanding. As a victim of a recent economic recession, a consideration of the role of interest rates on the overall functioning of the economy becomes particularly important. This paper shall seek to understand the concept of interest rates and how they affect the economy of the United States of America. The paper, in doing this, shall consider the causes of the ...

Article review

Article review

Introduction

Government interference play huge role in the economic processes: by conducting monetary or fiscal policy, policymakers are able to stimulate the economy during the periods of downturn and moderate too fast growth during the periods of economic boom: both these cases have devastating consequences for the general growth and development. Particularly, central banks, that make decisions regarding the monetary policy, are most important players. By using different tools, such as interest rates, open market operations, required reserves etc., central banks might influence on aggregate supply and aggregate demand, thus shifting equilibrium to the desired level (in other ...

Summary of these key indicators for the U.S. economy One of the key indicators of the US economy is current inflation. As at May 2016, the inflation rate stood at 1.02% (The World Bank, 2016). However, between January and May, the average inflation rate has been 1.01 percent. The second indicator is the unemployment rate recorded at 5.5 percent as at the end of May (The World Bank, 2016). The average for the year thus far has been 4.9 percent. The real GDP growth is also a critical indicator. In the first quarter of the year 2016, which ended ...

What is a cartel? (5 marks)

The companies in a market might collude to set the prices by making explicit or implicit agreements between them on the market price, sharing the market geographically, or controlling the quantity supplied in the market. The agreement between the companies in a specific market might create an oligopoly behaving like a monopoly. The companies might set the price, and all the agreement partners might obey the agreement. If the companies can create a large market power, they might behave like one monopolist. Cartel is the situation of existence of an explicit or implicit agreement between the companies in a ...

The Federal Reserve has one of the most unique duties in the world. Tasked with keeping both employment high and inflation low, it is the only central banking authority in the world that performs both functions as its mission. Studies performed by A. Phillips describe the inverse relationship between unemployment and the inflation of real wages. The Federal Reserve and Congress enact policies to counteract the inverse nature of unemployment and inflation. The Fed achieves its goals with manipulation of monetary policy, which is the control of the monetary supply, while Congress controls fiscal policy to help achieve similar ...

Abstract

The purpose of the above paper is to highlight the impact of the great recession that was experienced in 2007 -2009 and the bailout strategies used by governments to restore investment institutions from collapsing. The paper starts with an introduction that explains the impact of the great recession to the U.S and global economy. As a remedy to avert the adverse effects of the global recession, both short term and long term strategies were sought. The advantage of using the short-term strategies was to restore stability in the financial sector and prevent further collapsing so as to achieve economic ...

Introduction

Economic management is the most critical function of any government. It requires critical approaches through the adoption of efficient macro-economic policies that lead an economy in the desired direction. Inefficiencies in public policies result in poor economic management, which results in economic problems such as unemployment, inflation, and other forms of economic instabilities (Galí 98). This essay will answer questions that address some of these economic problems.

Government measures to increase the level of aggregate demand in the economy and their effectiveness

The level of aggregate demand is an essential factor in the determination of the economic position of an economy. It determines critical factors such as investment that indicate the GDP of a ...

The dynamics of the economy when the interest rates are at almost zero are a bit complicated, especially because the monetary policies have very little effect on the economy. However, the interplay between the fiscal and monetary policies will bring the economy to stabilization even though with great difficulty. Some of the factors at play bring a tradeoff between the success and failure of the possible policies. For example, the policies that will bring down the level of unemployment will tend to push up inflation. However, factors that will push the GDP upwards will also lower the rate of ...

In this case, we use the monthly returns of the two indexes for the seven-year period between 6th May, 2009 and 5th May, 2016. The monthly return are determined by comparing the current price with the previous month’s price. The monthly returns are then used to determine the average monthly return and the monthly standard deviation.

S&P MID CAP 400 INDEX

Average monthly return = 1.2047% or 0.012047 Monthly standard deviation = 4.4024% or 0.044024 Annual return = (1 + monthly return)12 – 1 = 1.01204712 – 1 = 1.1545 - 1 = 15.45% Annualised standard deviation = Monthly standard deviation × √12 = 0.044024 × √12 = 0.044024 × 3.4641 = 0.1525 = 15.25%

NASDAQ 100 INDEX

Average monthly return = 1.4196% ...

Answer 1: The factors that influence the Fed's balance sheet are its assets and liabilities. In assets Fed hold securities like U.S Treasury which is controlled by open market operations. Then the foreign exchange reserves issued by the foreign governments. The SDR(special drawing rights) and gold are official asset, other Federal Reserve asset and the discount loan. In liabilities, the currency in circulation, the reserves i.e. the accounts with commercial bank , government accounts and other liabilities which mainly consist of reserve repo rate. The asset that has increased Fed balance are purchase of treasury and mortgage bonds(Kearns). ...

The IS LM model or the Hicks –Hansen model is the macroeconomic tool that shows the relationship between the interest rates and the real output of goods and services and the money market. The intersection of the investment - saving curve or the IS curve and liquidity preference curve or the money supply curve is the general equilibrium in both the markets .This model explains the changes in the national income when the price level is fixed in the short run and also shows the reason for the shift in the aggregate demand curve. It was first developed by ...

International finance

Question 1: Uses of the balance of payment data It is used in the recording of economic transactions of the residents of a particular country to the rest of the world within a given period. Current account shows the total net amount a particular country is earning if it’s in excess or spending when in shortage. It’s calculated by net income from exports fewer payments from the imports. While the capital account; deals with the recording of the ownership of the foreign assets. It involves the reserve account and loans and investments a country and the rest ...

Introduction

In 2008, the entire world was rocked by the biggest financial crisis since the Great Depression. The crisis first affected the entire financial system of the United States before then quickly spread globally. The casualties of the crisis included the whole investment banking industry of the US. Other casualties were the US largest insurance company, largest mortgage lender, among other firms in the financial services sector. The US auto industry was severely hit leading to loss of jobs. The US unemployment rate increased by 4.9% points from the third quarter of 2007 to the third quarter of 2009. The ...

The term Thatcherism emanated from the belief in a combination of free market policies and upholding family values. With the emergence of Thatcherism, the role of the Friedrich (2014) presented a convincing argument against the British arguing that they would create an oppressive society where the citizenry would not have freedom by abandoning liberalism and individualism. He further argued that socialism had its roots in exaltation of state above its citizens and central planning of economic policies. For him it was undemocratic to impose the will of a minority upon the majority though central planning. The centralised planning systems ...

Introduction

Money plays a vital role in the determination of income and employment . interest rate are a significant determinant of aggregate spending ad the Federal Reserve which controls the money growth and the interest rates is the first institution to be blamed when the economy of in trouble. Now the question arises what is money.

Money Definition

Money is a medium of exchange. Money is divided into commodity money and token money. To some economist there is difference between commodity money and token money. A commodity money is a medium of exchange which has a commodity value as distinct from a value ...

Inflation in USA

Inflation in US Introduction Inflation refers to the rate at which the country is experiencing the general increase in prices of goods and services. When the rate of inflation is high, the purchasing power of the country’s currency will be low at the same time. This will comparably imply that higher amount of money is needed to purchase items that had been previously purchased at lower amounts of the same currency. The country’s currency would have lost the real value as a unit of account and as a medium of exchange of the economy. The chief measure ...

Recession refers to short period associated with decline in economic activities such as decrease in stock market business, high unemployment rates, poor housing facilities, high cost of due to low purchasing power of the country’s currency and general failure in the financial institutions. Recession may vary in terms of magnitude and in terms of how long it may persist (Gaston, 1994). Most economists’ belief on this subject is that recession differs from depression only by the degree of their severity. The implication is that depression is more severe form of recession-though with similar consequences. Usually, recession happens after ...

The money supply of a certain nation is determined by the monetary policy of its central bank. The Federal Reserve is the central bank of the U.S. A. Moreover; monetary policy refers to the methods central banks use to increase or decrease the amount of money held by banks. The central bank can increase the money supply by changing discount rates, reducing bank reserves or buying government securities. Selling government securities or increasing the banks’ deposit reserves will contract or limit money supply. The Federal Reserve utilizes monetary tools to control the amount of money and credit available in ...

Recently, China has recorded a remarkable growth in its economy of nearly 10% per year. The bulk of this growth comes from the banking sector characterized by poor asset quality, low capitalization, and massive state intervention. For this reason, the government introduced sweeping changes to the financial sector to boost its stability. These changes included transforming the banking sector from a policy-driven, state-owned, non-performing system to a profit-driven, multi-ownership, competitive system. Although the sector has recorded marked improvements in its operation and efficiency, additional efforts is needed to deal with problems revolving around non-performing loans and shadow banking. The ...

Introduction

Monetary policy is the process of government control on the economy through monetary instruments. The monetary authority in the economy uses the tools of monetary policy to affect demand and supply of money with the objective of fostering growth and maintaining price stability in the economy along with financial market stability. The instruments of monetary policy include rate of interest and open market operations. In this paper we attempt to show that monetary policy is effective in the short run but not in the long run. We use two different models to establish our argument, the AD/AS model and ...

What are the factors that led to the remarkable little change of the official attitudes towards usury in the late middle ages and the early years of the Renaissance? Although usury was considered as a sin against humanity, it was being exercised during the commercial revolution in Europe since it was acknowledged that interest was essential for the business. Geisst argues, "It was only when money began to be understood as a legitimate method of facilitating a trade that it could be universally accepted and interest understood as a method of facilitating business" (70). In addition, the rising commercialism ...

Introduction

Monetary policy is the endeavor by the federal or state government to control the amount of money circulating within an economy. These control measures are undertaken to cub the instances of inflations or to control the interest rates to sustainable levels. Monetary policies can either be expansionary or contractionary. Expansionary monetary policies are meant to expand the supply of money to the economy thereby boosting the economic activities (Afonso, 2012). Expansionary monetary policies also lead to a reduction in average interest rates. Contractionary monetary policies, on the other hand, are macro-economic tools used by the federal or the state ...

Most of the central banks in many countries have almost similar structure. However, the Federal Reserve System in the USA has a totally different structure. Federal Reserve System was created in 1913. The reasons as to why it has 12 Regional Federal Reserve Banks can be traced to the American political history .

Before the Federal Reserve System, there was fear in America, in the political arena, of centralized power. The Americans had a great resistance towards setting up of a central bank. They also had a high doubt on the moneyed interests upon which central banks were formed. This distrust had led ...

What is fiat money? Why is fiat money important in the United States today?

Fiat money is a kind of money that has no intrinsic value. It has value of exchange but no value in use. It is used as money because the government decreed it as valid money and the public willingly accept it in exchange of goods. Normally, fiat money bears “legal tender” feature and includes modern paper currency, coins and checkable deposits.

This kind of currency is very important in today’s modern economies like the United States primarily because it is widely used as ...

DD Curve is the summarized relationship between Exchange Rate and Ouput Level which shows all the combinations of output and the exchange rate for which the output market is in short run equilibrium i.e (aggregate demand= aggregate output)

The above figure represents upward sloping DD Curve explaining the effect of movement in exchange rate on output level when both Domestic Price Levels(P) and Foreign Price Levels(P*) are fixed. The figure represents the effect of depreciation of domestic currency on domestic output levels and related aggregate demand. Thus, when domestic currency depreciates ...

Slide 1:

The monetary policy actions by the Bank of England determines the amount the bank will charge as interest when it lends to other banks. This interest rate is vital in determining the rates at which banks will lend to their customers such as businesses and institutions.

If the bank of England charges higher rates of interest to banks, this obviously increases the costs of these loans and in retrospect, the banks must raise their lending rates to customers. Higher lending rates means few customers will be willing to borrow from banks and may switch to other lending institutions ...

Hoarding among Americans Born during the Great Depression: Understanding the Socio-Economic Conditions of a Forlorn Era in Relation to a Peculiar Habit

Introduction

The capitalist economic setup of the United States (US) is not purely a success story. While markets in the US appear robust and active in contemporary times, it does not mean that it has not experienced any form of fluctuations. In fact, various maladies have affected the US economy for one too many times. In fact, the most recent economic crisis that has hit the US – the global financial crisis of 2008, has left the nation reeling in the pains ...

Article Reviews and Summary

Federal Reserve has given another indication that it will be more than willing to use a much lenient monetary policy in order to heal the convalescing US economy. The lenient policy will drive interest rates further down or will keep the interest rates stable at near 0%. The Federal Reserve may also increase the money supply in the economy to boost the economic transactions in the country.

A decrease in interest rates and an increase in the money supply would mean that investors would use that money to set up new business ventures which would lead to improvement in unemployment ...

- Introduction

IBM is a world leader company in information technology and stands as the largest revenue generating Company in its field. In the past 50 years, IBM has earned a place for itself as the pioneer in information technology developments and innovation. The Company manufactures products ranging from hardware to software for its impressive clientele around the world. These products are designed for another range of storage products, line of business servers, customized microchips including the application software. In addition to manufacturing, IBM also serves as a consulting and outsourcing agent. The new information age is quite challenging to compete ...

THE UNITED STATES FEDERAL RESERVE SYSTEM

The Federal Reserve is the central bank of the United States of America (Federal Reserve System, 2013). It is governed by a board of directors appointed by the president, whose main responsibility is the determination of the monetary policy through the manipulation of the various monetary tools (Federal Reserve Board, 2013). The bank was originally formed in December 23rd 1913 by an act of congress and is currently headquartered in Washington D.C, with twelve other branches located in major cities across the country (Federal Reserve System, 2013).

One of the monetary tools that are used in setting the monetary ...

Role of Federal Reserve

In the past few years, the Federal Reserve has come under increased scrutiny due to the financial crisis of 2007 – 2009. It has been criticized for lowering the interest rates, which resulted in cheaper mortgages, and thereby precipitating into a full blown financial crisis. Further, it has also been criticized for transforming itself into an investment vehicle, due to its role in quantitative easing, even though it helped in financial recovery. Historically, it has been Federal Reserve’s dual mandate to maintain the stability of prices and employment. That it does by varying its federal funds target, by ...

Objective 1:

i) Aggregate demand shows demand for real GDP by all the people in an economy, which they are willing and able to buy at different possible prices at a given point of time, holding other factors constant. The aggregate demand curve is downward sloping and shows an inverse relationship between price level and real GDP. Following is the explanation for downward sloping demand curve, which is very much different from income and substitution effects of demand of a single product:

1) Interest Rate Effects: When price levels increases in the economy, businesses and industries, have to borrow additional funds to ...

Introduction

This is a strategy adopted by the government through the Central Bank to control macroeconomic shocks due to fluctuation in wages and prices of goods and services. Stabilization may include monitoring the business cycle and interest rate regulation by the central banks. Moderation of these factors leads to changes in unemployment rate, recovery of an economy from economic shock control borrowing and money supply. In general terms stabilization are used to regulate the fluctuation of business cycle. There are two main elements of stabilization policies, that is, monetary and fiscal policies.

Elements of Stabilization Policies

Monetary policy This is the process through which ...

Question

Assume that the country is in a period of high unemployment, interest rates are at almost zero, inflation is about 2% per year, and GDP growth is less than 2% per year. Suggest how fiscal and monetary policy can move those numbers to an acceptable level keeping inflation the same. What is the first action you would take as the president? As the chairman of the Fed? Why? What would be your subsequent steps?

Answer

Analyzing the given data indicates us that this economy is suffering from the deflation. In another word, we see high unemployment, very low inflation and very ...

The Mexican peso in this case appreciates in relative to the US dollar, is of great benefit to the Mexican production industries. This is because the cost of exports will raise thus increase in profits for the Mexican industries. Mexican products too will be competitive in the international market as the production cost does not exceed the sale value of the product. US investment in Mexico will increase due to certainty of the value the peso and the higher inflation rate of Mexico than that of US. Foreign exchange risk is minimized as investors are able to eliminate all ...

Question A

According to Gregory Mankiw (2011), trade balance reflects the difference between net worth of exports and imports in a given country. Consequently, positive trade balance suggests in monetary value country exports more than it imports, while negative trading balance (trade deficit) is associated with dominance of imports over exports. Economists argue that trade deficit is not always considered to have a negative impact on the national economy, however it often creates potential risks which may result in harsh economic consequences if they are not addressed properly. For example, if net exports are negative it is assumed that proceedings from exports are ...

In case, real GDP is lower than potential GPD expansionary policies are implemented in correcting contraction of business cycle. Expansionary Fiscal policy leads to increases in purchases by government, tax rate decrease and transfer payment increase to overcome contracting business cycle. Expansionary fiscal policy closes gap of recession, stimulates economy and decreases rate of unemployment.

Fiscal policy tools to stimulate economy are:

Government Purchases Expenditures done by government sector for services and final goods come under Government purchases. Government purchases are part of GDP bought by the government. Government purchases include heavy cost expenses like highway construction and aircraft clips carriers to smaller expenses like ...

Question 1

The American economy is just making a comeback from the 2008 economic recession. The recession took the economy to its lowest point in 25 years. The recession arose from the housing bubble, which led to the eventual disintegration of the financial markets. The housing market caused the disintegration of the markets due to irresponsible activities by investors and financial institutions. The housing market is quite different from the stocks market hence; the circumstances that led to the recession involved a series of unique events. The housing industry involves risks that is quite complex to understand because people view houses as assets ...

In this section, I will provide a comparison of the inflation rate and economic growth of Belgium and the Eurozone. The inflation rate is defined as the percentage change in the price index from the preceding period. It captures the rate of change of prices calculated on a monthly or annual basis. The data on the inflation rate for Belgium and the Eurozone are presented below which I obtained from the news release of Eurostat (2013).

Meanwhile, economic growth is defined as the increase in the capacity of the economy to produce goods and services, compared from one period to another. ...

The Maastricht Treaty launched the European Monetary Union in the year 1992. The union comprised of two parts, which included the creation of euro the common currency and creation of the European Central Bank, which coordinates all monetary policies in the Eurozone. The treaty also created the rules for countries willing to join the union. The other element of the treaty was the national central banks of the 16 member countries. European Monetary Union creation has led to price stability and proper management of public finances (McKay Volz & Wolfinger 2011).The final phase of the single currency introduction ...

- When a country such as the United States is experiencing serve and prolonged recessionary trend discount rate, term auction, and open market facility can provide useful means of ensuring that the economy returns in the right course. Discount rate is the interest rate that the central bank charges commercial banks and other depository institutions when they receive money from the Federal Reserve Bank's lending facility. During periods of prolonged recessionary trend, the Federal Reserve System should reduce the discount rate in order to encourage commercial banks and other financial institutions to lower the interest rate they charge to ...

1. Claims of Globalism

Globalism is mesh of inter-reliance at a multi-continental level whereby, there is exchange of people, information, and capital between continents. An increase in Globalism is termed as Globalization while a decrease is De-globalization.

Globalization integrates global markets and liberalizes them

Globalism integrates global markets via the inter-reliance among the continents and liberalizes global markets through the divide between a state’s economy and the government, such that there is minimal interference from the government. The absence of government interference increases social interaction among the continents and the exchange of technology, labor, and wealth.

Globalization is unavoidable and permanent

The establishment of inter-reliance among the continents has been going on and will continue to take ...

Contesting for a political position in the United States has become an increasingly costly affair for aspiring candidates. The need to attract voters through lavishly staged campaigns has led to the heightening of the amounts of money that individuals can contribute to their preferred candidates. This article explains the impact of the Supreme Court’s decision to abolish limits imposed on the election spending. The Court’s ruling was issued towards the beginning of the campaign period, and would most probably intensify the pivotal role that campaign funds plays in American politics. The decision seemed to change the Finance Law ...

Executive Summary

Banks such as UK bank get the money that they lend from the deposits. The level of lending is usually dependent on the demand of the funds by the public and on the economic level of the state. When the demand for money is high, UK bank will have to check on the level of money that is circulation before it decides on how much to lend out (Sessa, 2011). It is done to reduce chances of having excess money supply into the economy that may result to the inflation. The bank can use various ways to ensure that ...

Following the American Psychological Association’s Guidelines

INTRODUCTION The economy management of the country has two kinds of policies to intervene and regulate the markets in case of market failure: Fiscal policies and Monetary policies. Fiscal policies are the responsibility of the government, and the monetary policies are implemented by the Federal Reserve System (FED). The economic policies can be implemented in two ways: expansionary and contractionary economic policies. Expansionary policies stimulate the economy and expenditures of consumption and investment increases as the result of these policies. Contractionary policies slowdown the economy, and the expenditure level decreases. In this essay, the definitions of the fiscal ...

Abstract

The use and interpretation of economic policies are fundamental to the formulation of strategic plans and courses of action. Economists and policy makers play a vital role in executing this important analytic and interpretive task. Keynesian and monetary schools of thoughts are some of the important alternatives applied in making economic decisions. Monetarists believe that government involvement in controlling the level of aggregate demand in the economy is counterproductive in the long run. In its stead, they propose that the best way the government can control unemployment and inflation levels is by the use of monetary policies. Monetary policies ...

[University affiliation] - Given the unemployment level of 7.2 % the USA finds itself in a recessionary gap that is shown in the graph as the difference between Y and YF. The main reason for that is a lack of job places (full-time): people, who are willing to work, but are unable to find job placement, constitute the major component of labor force. The factor of insufficient job market directly affects the short-run Supply curve (ASSR) by contracting economy. The year used in the article and on the graph is 2013. ΠF is the price level at full employment. Π ...

Introduction

Financial markets are subject to market factors including those that affect demand and supply for money. In that respect, this discussion refers to an article on US debt crisis to demonstrate the effect of such factors by analyzing the effect of US debt ceiling crisis that include foreign financial institutions hoarding funds and their refusal to accept US treasuries as collateral.

Body

- Financial market’s debt ceiling impact on interest rate and private investments without an agreement that US was no longer able to borrow. With a debt ceiling but lack of an agreement that the US government could ...

Question 1

The federal reserve bank is a major institution in the American’s economy and society designed to offer financial stability by maintaining currency flexibility. The Fed as consistently played a significant role in the Untied States economy and monetary policy since its establishment. The Fed established in 1913, therefore, its the roles and regulations go back only to the early years of the 20th century. For instance, the Fed came into play when a harsh economic crisis started in 2008. During this period the GDP shrank, unemployment increased and millions of Americans were worried about their futures. It was the role of ...

Banks are an important sector of any given economy. It is in these banks that individuals and companies store their liquid assets. Liquid assets are of great importance to the economy. Once at the bank, the liquid cash can be used to develop the economy. The bank lends the deposited money to other parties which then use it to make other investments. This extension of credit to other customers helps to create money in an economy (Jeucken 55). The creation of money affects the money supply. Increase in the money supply in the market increases the people’s purchasing ...

Cambridge Dictionary defines money as the coins and bills of a certain value used for the financial exchange. Money serves as a medium of economic exchange, a measure of value, and as a mechanism of saving and storing wealth. Money is accepted in return for goods and services, and it acts as a measure of value in the price system. It is the key mechanism of making payments and serves as a means of storing the purchasing power. Money is not only coins and bills, but any commodity that is used as an instrument for exchange. Centuries ago people have been using seashells ...

Introduction

Economic growth an increase in the country’s national income measured over a period. Gross National product and Gross Domestic product are the key measuring indicators that define a country’s growth status based on utilization of resources by the population for productivity. Increase in technological infrastructure facilitates quality production, minimizes waste and costs. According to economic theorists, a country is presumed to attain economic growth when their resources are fully employed in sustaining the social and economic welfare of every citizen (Jones 2002). As result, the role of every rational government is to maintain its citizens through allocation of scarce resources ...

Essay Questions

1). The Federal Reserve is composed of 12 banks and Board of governors, which comprises of seven people. It regulates the commercial bank and provides assistance to the banking infrastructure. It also plays an effective role in controlling the money supply as well as credit trap. The function of Federal Reserve is to facilitate sustainable economic growth without causing inflation. However, the Federal Reserve also anticipates the speed limit and change in the interest rate in order to ensure the growth of the economy. The Federal Open Market Committee or FOMC in the Federal Reserve is responsible for making ...

ITERNATIONAL MONETARY SYSTEMS

Abstract The purpose of this paper was to study three main monetary systems: the Gold Standard, the Bretton Woods, and post-Bretton Woods. International monetary system is a set of methods, tools and intergovernmental bodies, with the help of which the mutual payment and settlement turnover function within the global economy. There existed and succeeded each other three international monetary system. The first one, the Gold standard, was based on gold which was the main form of money. National currencies were pegged to gold, and the gold content of the currencies was correlated with each other at a fixed exchange ...

In labor economics, full employment embodies a situation where any available labor resources are efficiently utilized in the economy. It is the level of unemployment just above 0% that is acceptable. At this level, cyclical and demand deficient unemployment do not arise, hence very low unemployment rates. In the US, full employment has not been reached as some labor, or skilled people in the US are still jobless. Currently, unemployment rate in the US stands at 5.9% as at September 2014 (BLS, 1). Frictional unemployment occurs when labor moves from one sector to another. Workers sometimes change jobs and ...