Economics Class Questionnaire

1786 Words4 Pages
bulb-icon

Recommended: Financial Institutions in the economy

BUSINESS ECONOMICS
ASSIGNMENT- 3

Ques. 1)(a)Analyse both the conventional and unconventional tools used by central banks.
(a) Meaning of Monetary Policy:-
Monetary policy refers to the measures which the central bank of the country takes in controlling the money and credit supply in the country with a view to achieving certain specific economic objectives. These objectives are:

1. Rapid Economic Growth: The monetary policy effects the economic development by controlling interest rates in the economy and its effect.
2. Price Stability: the price rise leads to inflation. Too much of inflation is harmful that the central bank has to control using these policies
3. Exchange Rate Stability: it is the rate at which the currency is exchanged in terms of any other foreign currency. It has to be maintained for the trade stability.
4. Balance of Payments (BOP) Equilibrium: The excess funds are infused in the economy when required and the extra funds are pulled out of the economy as and when required.
5. Full Employment: The central bank tries to achieve full employment rate by increasing the aggregate demand in the economy without increasing the inflation too much.
6. Equal Income Distribution: It ensures proper distribution of credit at cheaper rates for everybody in the economy.

There are certain tools that the central bank uses to have control the economy of the country.
There are two types of tools that are conventional and the non- conventional tools:
A. Conventional Tools
• Repo Rate and the Reverse Repo Rate:
a. Repo Rate: It is the interest rate that the bank has to pay when it takes any credit from the Central bank.
b. Reverse Repo Rate: It is the interest rate that the RBI has to pay when it takes any credit from an...

... middle of paper ...

...ON:
Alesina, A, and R. Perotti,(1997) “ Fiscal Adjustments in OECD Countries: Composition and Macroeconomic Effects.” IMF Staff Papers,92,571-89
Aschauer, D.A.(1989) “ Is Public Expenditure Productive?: Journal of Monetary Economics, 23,177-200
Pigou’s, P.(1935). Theory of Unemployment. Journal of Economics, 286-324
Taylor, J.B.(1998).Economics. Boston: Houghton Miffin
Ahiakpor, J.C.W..(1995) A Paradox of Thrift or Keynes’s misrepresentation of Saving in Classical Theory of Growth, Southern Economic Journal, 62,16-33
Barzun, J.(1958) Darwin, Marx, Wagner: Critique of a Heritage, Doubleday, New York
Skidelsky, R.(1996) Keynes, Oxford University Press, Oxford
Waud, R.N.Maxwell, P. Hocking, A Bonnici, J, Ward, I.(1996) Economics:Third Australian Edition, Addison Longmon, Melbourne
Skidelsky, R.(2000) John Maynard Keynes, Fighting for Britain 1937-46, MacMillan, London

Show More
Related

  • The U.S. Free-Enterprise Economy

    788 Words  | 2 Pages

    Monetary Policy is another policy used in Keynesianism which is a list of protocols designed to regulate the economy by setting the amount of money that is in circulation and controlled interest levels. The Federal Reserve system, also known as the central banking system in the U.S., which holds control of this policy. Monetary policy has three tools used by the Federal Reserve to enforce this policy. Reserve Requirement is the first tool that determines the lowest amount of money a bank must possess and is not able to lend out. The second way to enforce monetary policy is by using the discount rate or the interest rate a bank will charge.

    Read More

  • Causes of the 2008 US Recession

    1519 Words  | 4 Pages

    Brue, S. L., Flynn, S. M., & McConnell, C. R. (2011).Economics principles, problems and policies. (19 ed.). New

    Read More

  • The Federal Reserve

    2066 Words  | 5 Pages

    The Federal Reserve plays a significant role in maintaining the stability and liquidity (the ability to turn an asset into cash) of the financial system by working towards low and stable inflation and also strive to encourage growth in output and employment . A second component, the Federal Reserve Board...

    Read More

  • Animal Spirits Chapter Summary

    1039 Words  | 3 Pages

    The seventh chapter asks, ‘Why Do Central Bankers Have Power over the Economy?’. In this chapter, the authors evaluate the power of central banks during normal and tough times and question whether central banks ‘have the power to control something as huge as the macroeonomy’ (p.74).

    Read More

  • The Federal Reserve Bank and the Decline of the U.S. Economy

    3522 Words  | 8 Pages

    Before we begin our investigation, it is imperative that we understand the historical role of the central bank in the United States. Examining the traditional motives of this institution over time will help the reader observe a direct correlation between it and its ability to manipulate an economy. To start, I will examine one of its central policies...

    Read More

  • Monetary Policy

    1670 Words  | 4 Pages

    In the study of macroeconomics there are several sub factors that affect the economy either favorably or adversely. One dynamic of macroeconomics is monetary policy. Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the level of spending in the economy. “The goal of a monetary policy is to achieve and maintain price level stability, full employment and economic growth.” (McConnell & Brue, 2004).

    Read More

  • Current Monetary Policy Of The United States

    2057 Words  | 5 Pages

    The first major aspect of the monetary policy by the Federal Reserve is its interest rate policy. This interest rate policy is mainly determined by the figure for the federal funds rate, which is the rate at which commercial banks with balances held within the Federal Reserve can borrow from each other overnight in ord...

    Read More

  • The Three Most Important Things I Learned in Economics Class

    965 Words  | 2 Pages

    The Fed desires to maintain high employment because the condition of high unemployment, the alternative, creates idle workers and idle resources. This leads to closed factories, unused equipment and materials, ultimately decreasing our GDP. Now, let me further explain that the goal for high unemployment is not an unemployment level of zero, rather a level above zero where labor demand equals labor supply. This is known as the ‘natural rate of unemployment’.

    Read More

  • The Federal Reserve System

    2337 Words  | 5 Pages

    Another problem prior to the establishment of the Federal Reserve System was the inelasticity of bank credit and the supply of money. Small banks placed their excess reserves in large central reserve banks. Whenever a bank’s depositors wanted their funds, the smaller banks would be covered by the central banks. The system worked well during normal conditions. Some banks would draw down on their reserves as other banks would be building up their reserves. In times of excessive demand, however, the problem became quite serious. When the public wanted large amounts of currency, the

    Read More

  • Causes Of Inflation Essay

    1416 Words  | 3 Pages

    Inflation is defined as an increase in the expected price level and has been the signal for an improving economy, but it has also weakened an economy due to the unemployment it usually produces which usually hurts the Middle class the most. A healthy rate of inflation means an expanding economy due to higher tax revenues for the government and higher wages for businesses that are booming due to the high demand of their products. But if inflation surpasses of what is expected than employer will have to reduce wages to meet these new prices. When the Federal Reserve creates inflation most argue that this is robbing people of the money that they have saved because they have to use it due to the rise in prices. Printing

    Read More

  • Different Types of Unemployment

    1050 Words  | 3 Pages

    Tragakes, E. (2012). Economics for the IB diploma (2nd ed.). Cambridge, UK: Cambridge University Press.

    Read More

  • Economics of the Automobile Industry

    2412 Words  | 5 Pages

    O'Sullivan, A., & Sheffrin, S. (2005). Economics. Upper Saddle River, New Jersey: Pearson Prentice Hall.

    Read More

  • Demand For Money Essay

    801 Words  | 2 Pages

    “One’s income determines the amount one saves, but the interest rate determines how it is saved”.

    Read More

  • Macroeconomic Objectives Essay

    1754 Words  | 4 Pages

    It is difficult for government to achieve all the macroeconomics objectives at the same time. Conflicts between macroeconomics objectives means a policy irritating aggregate demand may reduce unemployment in the short term but launch a period of higher inflation and exacerbate the current account of the balance of payments which can also dividend into main objectives and additional objectives (N. T. Macdonald,

    Read More

  • Inflation And Inflation Essay

    1766 Words  | 4 Pages

    Inflation is the rate at which the purchasing power of currency is falling, consequently, the general level of prices for goods and services is rising. Central banks endeavor to point of confinement inflation, and maintain a strategic distance from collapse i.e. deflation, with a specific end goal to keep the economy running smoothly.

    Read More

More about Economics Class Questionnaire

Open Document