Free Money supply Essays and Papers

According to Wright & Quadrini, (2009), the money supply is determined by interactions between four economic forces: depository institutions, depositors, borrowers and central banks. Central banks manipulate money supply in the economy by controlling its money liability called the monetary base (MB). MB, in fact, equals to the total currency in circulation (C) plus Reserves (R) which are cash in banks’ vaults and commercial banks’ deposits with the Fed. When the Fed engaged in Open Market Operation

Money Supply plays an important role in macroeconomic analysis, especially in selecting an appropriate monetary and fiscal policy. Considerably, I am yet to come across theoretical work that has been done on this topic (analysis money supply and its impact on other variable i.e. inflation, interest rate, real GDP and nominal GDP). However some other topics similar to this one have been done by AL-SHARKAS, Adel, where he uses the same technique and models on the topic ‘out put response to shocks to

issue of generally any economy and particularly Pakistan economy is printing of lot of money i.e. increase in money supply. Now the question is how this increase in money supply affects the consumption expenditure in Pakistan? To get the answer of this question many scholars and authors such as Mushtaq, Ghafoor, Abedullah and Ahmed (2011), Choudhry and Noor (2009) and Zakaria (2007) examine the impact of money supply growth on consumption expenditure and found positive relationship between the both.

the Federal Reserve. In addition, I will explain how these monetary tools influence the money supply and in turn affect macroeconomic factors. Next, I will explain how money is created. Lastly, I will recommend monetary policy combinations that best achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment. Tools Used by the Federal Reserve to Control the Money Supply The three monetary tools used by the Federal Reserve to alter the reserves of commercial

system. Their primary focus is to regulate the health of the economy as a whole and implements monetary policy to help increase the money supply during a downturn, and restrict the money supply during periods of excessive growth. During periods when the economy faces high inflation, federal reserve will use contractionary monetary policy by decreasing money supply which in turn results in higher interest rates, lower investment spending, and lower consumer spending. In contrast, when the economy

creation of a centralized banking system was put into place to target double digit inflation. The Federal Reserve System was created 1913 with the hopes of increasing the supply of currency. Monetary Policy Monetary policy is the process by which the government, central bank or monetary authority manages the money supply to achieve specific goals. These goals include constraining inflation, maintaining an exchange rate, achieving full employment or economic growth (Monetary policy, Wikipedia)

sectors. The impact of oil price changes on stock market has been widely discussed by academic researchers, investors and policy makers. Overall, the aggregate stock returns is positive or negative depends on whether crude oil prices driven by demand or supply shocks in the crude oil market (Kilian and Park, 2009). According to the study, the price of crude oil, which is the primary fuel of the industrial activity, plays an important role in shaping the political and economic development, not only to continue

regulation of the money supply (monetary policy). This paper is primarily focus on the monetary system in Macroeconomic and the paper will identified the tools that used by the Federal Reserve to control the money supply, Macroeconomic Factors, and the monetary policy combinations that best achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment. How money is created and what is the Money Supply? According to Schwartz (2002), the definition of money has varied

means that the central bank will print more money to buy long-term bonds from commercial banks or private sectors to increase the money supply in the financial market. By inputting more money to buy long-term bonds, it will lower the long-term market interest rate and increase the market price of the long-term bonds, which will lead to lower the earnings from long-term bonds. At low interest rates, it promotes people to consume more and borrow more money from the financial institution. As a result

autarky or closed economy in the short term. The IS-LM model explains a combination of equilibrium in goods market and money market. Equilibrium in goods market is achieved when investment (I) equals saving (S) and is termed as IS. IS = I+S (2) On the other side, equilibrium in money market is achieved when demand for liquidity (L) equals the supply of money (M). LM= L+M (3) Two variables, output (Y) and interest rate (i) determines the equilibrium in