In: Economics
ii. Analyze new monetary policy actions undertaken by the U.S. government throughout the time period by describing their intended effects, using macroeconomic principles to explain the actions for 2000-2010.
Answer:
Monetary policy is a macroeconomic policy undertaken by a
government . This mainly includes management of money supply and
interest rate . This policy is used by countries in order to attain
macroeconomic objectives like inflation,consumption,liquidity and
growth .
In US federal reserve is in charge of taking new monetary policies
.
The federal reserves 3 instruments of monetary policy are open
market operations,discount rate,and reserve requirements
OPEN MARKET OPERATIONS:This is used to influence the supply of bank
reserves . This carried out by Domestic Trading Desk of the Federal
Reserve Bank of New York under the guidance of FOMC . If Fed wants
to increase the reserve,it will buy the securities and pay them by
depositing in to the account, which is maintained at Fed by primary
Dealer's Bank . If it wants to decrease the reserve,it will sell
the securities and collects from those accounts .
Discount rate:This is the interest rate imposed by Fed on loans
which are given for short term period to deposited institutions
.
Reserve Requirements:These are a portion of bank's deposit ,which
should be maintained in their vaults or on deposit at a Federal
Reserve Bank
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