The course that I took this term on money and banking was of great value to me. It taught me some very important things. One of the most important things that I learned in this course was that the Federal Reserve is the best resource for information concerning the economy. Another important thing that I learned was that interest rates mean different things to different people. A third very important thing that I learned was how a financial crisis can start in the United States.
There is an abundance of information about our economy on the television newscasts, in the newspapers, and on the Internet. A lot this news is very confusing, particularly when one article contains information that conflicts with another article. This sometimes happens within the same day. One day you may be watching the news and hear that the interest rates and inflation will be rising soon and rapidly, and the next minute you hear the interest rates and prices will remain steadily under control for some time. To complicate things even further, the news is oftentimes clouded with opinions or biases. I have learned in this course that the best way to get an accurate account on issues concerning the economy is to go straight to the source, which is the Federal Reserve.
The Federal Reserve System makes it their business to know where the economy is headed and how monetary policy may affect the economy. Goals of the Federal Reserve System include high employment, economic growth, and the stability of financial markets, foreign exchange markets, prices, and interest rates. That being said, it became obvious to me that the Federal Reserve System is the proper resource for matters concerning the economy. I can access their website anytime to find the la...
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...t up to par. The mortgage brokers allowed many high risk borrowers to obtain loans that they could not afford. When the price of houses fell, the values of these homes were well below what was owed for the mortgages. This caused many borrowers to default on their loans. Before we knew it, the balance sheets of banks deteriorated, the stock market crashed, and large investment banks began to fail. This was all started with financial innovation that had gone out of control.
Well, it was really difficult to pick just three things that I felt were the most important things that I learned in this class. I actually learned more in this class than any other class that I’ve taken in my degree program at this point. Every single topic was interesting, relevant, and important. The three things that I picked as most important to me have made the biggest impression on me.
The Federal Reserve or the FED is the central banking system in the United States. It was created in 1913 under president Wilson, with the purpose of controlling the stability of the financial system. The monetary policy is the course of action that the FED takes to ensure a stable economy in the United States.
The biggest lesson I learn during this class is time management. I have a 9 month old baby and he allows wants my attention. I had to rely on a family member to take care of him while I get a few hours to read the textbook and do the writing assignments. I had to truly focus on my work and not go to social sites because I barely had time to do so.
The first goal of the Fed’s dual mandate is for the United States to have maximum employment and good economic growth. They just want to make sure the country stays out of a recession and the unemployment rate is kept low. The second goal is price stability or simply stopping inflation. Without keeping inflation stable the U.S dollar will lose it value in the world economy and cause all sorts of new problems for the country. (Federal Reserve Bank of Chicago) The Federal Reserve makes a lot of decisions based off of what the outcome
The Federal Reserve controls the economy of the United States through a variety of tools. They use these tools to shape the monetary policy of the United States in order to promote economic growth and reduce the rate of inflation and the unemployment rate. By adjusting these tools, the Fed is able to control the amount of money in the supply. By controlling the amount of money, the Fed can affect the macro-economic indicators and steer the economy away from runaway inflation or a recession.
Over the past few years we have realized the impact that the Federal Government has on our economy, yet we never knew enough about the subject to understand why. While taking this Economics course it has brought so many things to our attention, especially since we see inflation, gas prices, unemployment and interest rates on the rise. It has given us a better understanding of the effect of the Government on the economy, the stock market, the interest rates, etc. Since the Federal Government has such a control over our Economy, we decided to tackle the subject of the Federal Reserve System and try to get a better understanding of the history, the structure, and the monetary policy of the power that it holds.
In conjunction with their respective governments, central banks have been manipulating economies for decades. Central bankers have sought to control interest rates, inflation and credit through their policies. Their efforts have impacted the stock market, job creation, home construction and many more aspects of the economy. However, in recent years, central bankers have manipulated themselves into a corner and become trapped in the mess that they made.
•Merrill Lynch, a massive investment back on Wall Street was the starter of the biggest mortgage companies to go wild. Merrill plan was to do a subprime mortgages that would get people to fail on their own toxic products. He knew those debts would stack up and then people would not afford to pay off that mortgage. His plan was to secretly bet against or insuring themselves to fail. Merrill only focused on making more money by doing subprime mortgages. Therefore, the plan was to get mortgages that would not be sustained and redo it into a subprime mortgages. Indeed he would sell them off other corporation that would not question the investment and would more likely not be able to understand the possible risk of buying it. Merrill was doing
"Monetary Policy is the most significant function of the Fed; it is probably the most-used policy in macroeconomics" (Colander, 2004, p. 661). This paper will discuss and elaborate on "The Monetary Policy Report" submitted to the Congress on February 11, 2003 and concepts of Macroeconomics by David Colander. The state of the economy, concerns of the Federal Reserve, and the stated direction of recent monetary policy will also be discussed.
We learned so much in course that applies to our everyday lives and the condition and operation of the country that I actually wish they had taught it back in high school. There was so much subject matter covered that it is difficult to narrow what I learned down to just three things. The textbook and supporting documentation and discussion pertained to the financial system. The financial system is basically how the money moves through our economy. Funds flow primarily through the financial markets which our book defines as; “Markets in which funds are transferred from people who have excess available funds to people who have shortage”. (Mishkin, 2010) The key is to keep the funds productively working in the economy. I will focus broadly and say that the three most important things I learned in this course were about money & financial system itself, the institutions that fuel the system and the Central Banks.
Author Unknown (1994). The Federal Reserve System: Purposes and Functions (5th ed.) Published by Library of Congress
The "subprime crises" was one of the most significant financial events since the Great Depression and definitely left a mark upon the country as we remain upon a steady path towards recovering fully. The financial crisis of 2008, became a defining moment within the infrastructure of the US financial system and its need for restructuring. One of the main moments that alerted the global economy of our declining state was the bankruptcy of Lehman Brothers on Sunday, September 14, 2008 and after this the economy began spreading as companies and individuals were struggling to find a way around this crisis. (Murphy, 2008) The US banking sector was first hit with a crisis amongst liquidity and declining world stock markets as well. The subprime mortgage crisis was characterized by a decrease within the housing market due to excessive individuals and corporate debt along with risky lending and borrowing practices. Over time, the market apparently began displaying more weaknesses as the global financial system was being affected. With this being said, this brings into question about who is actually to assume blame for this financial fiasco. It is extremely hard to just assign blame to one individual party as there were many different factors at work here. This paper will analyze how the stakeholders created a financial disaster and did nothing to prevent it as the credit rating agencies created an amount of turmoil due to their unethical decisions and costly mistakes.
The term Monetary policy refers to the method through which a country’s monetary authority, such as the Federal Reserve or the Bank of England control money supply for the aim of promoting economic stability and growth and is primarily achieved by the targeting of various interest rates. Monetary policy may be either contractionary or expansionary whereby a contractionary policy reduces the money supply, reduces the rate at which money is supplied or sets about an increase in interest rates. Expansionary policies on the other hand increase the supply of money or lower the interest rates. Interest rates may also be referred to as tight if their aim is to reduce inflation; neutral, if their aim is neither inflation reduction nor growth stimulation; or, accommodative, if aimed at stimulating growth. Monetary policies have a great impact on the economic stability of a country and if not well formulated, may lead to economic calamities (Reinhart & Rogoff, 2013). The current monetary policy of the United States Federal Reserve while being accommodative and expansionary so as to stimulate growth after the 2008 recession, will lead to an economic pitfall if maintained in its current state. This paper will examine this current policy, its strengths and weaknesses as well as recommendations that will ensure economic stability.
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).
As we are moving to the end of the course, we want to present you with the Federal Reserve System (Fed), which is the central bank of the USA. We are going to explore the roles of Fed in regularizing the economy, its function, and also the tools used in doing that. We will learn how central banks regulate the banking system and how they manage money supply in economies. We will also be presented to the financial crises lessons we can be able to understand the importance of the regulatory system; and then, we answering questions such as:
Impact of monetary policy on the economy a regional Fed perspective on inflation, unemployment, and QE3 : Hearing before the Subcommittee on Domestic Monetary Policy and Technology of the Committee on Financial Services, U.S. House of Representatives, One. (2011). Washington: U.S. G.P.O.