Monetary Policy
In the United States, the Federal eserve system is charged with implementing monetary policy (Investopedia, 2013). Monetary policy is essentially any the output of any central bank that seeks to manage an economy by means of manipulating the supply of money in the economy (Investopedia, 2013). The Federal eserve (2013) defines monetary policy as what it does to "influence the amount of money and credit in the U.S. economy." Thus, monetary policy affects not only the quantity of money but the cost of money and these factors directly affect the broader market with respect to investment, manufacturing output and overall economic activity.

The Federal eserve uses monetary policy for three main purposes. The first is to management the GDP, the second is to manage inflation and the third is to manage unemployment. The Fed seeks to strike a balance between these three objectives with its policy, and the result of…...

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References

Federal Reserve. (2013). Monetary policy basics. Federal Reserve Education. Retrieved December 11, 2013 from  http://www.federalreserveeducation.org/about-the-fed/structure-and-functions/monetary-policy/ 

Gavin, W. (2012). What is potential GDP and why does it matter? Federal Reserve Bank of St. Louis. Retrieved December 12, 2013 from  http://research.stlouisfed.org/publications/es/article/9228 

Investopedia. (2013). Definition of monetary policy. Investopedia. Retrieved December 11, 2013 from  http://www.investopedia.com/terms/m/monetarypolicy.asp 

Simpson, T. (2005). The Federal Reserve System: Purposes & Functions. Federal Reserve Retrieved December 11, 2013 from  http://www.federalreserve.gov/pf/pdf/pf_1.pdf#page=4

Monetary Policy
Every economic activity in the United States is related to the policies that are decided by the monetary policies of the nation that are formulated. This involves all activities like purchase of houses, starting up of new business enterprises, and expansion of businesses, investments in new plants or machinery. It also affects our investment decisions like putting our investments in banks, bonds, or the stock market. It is also well-known that the United States is the biggest economy of the world, and this causes its economy to have affects on them, and thus any decision about the monetary policy of the United States will also have an effect on them. The purpose of any monetary policy in any country is to correct the then present shortcomings of the economy like the situations of inflation or deflation, economic output and finally the most important of them all - employment.

Monetary policy…...

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References

How does monetary policy affect the economy?" Available at   Internet; Accessed 09 December, 2003http://www.frbsf.org/publications/federalreserve/monetary/affect.html .

Sazton, Jin. "International Dimensions to U.S. Monetary Policy," Joint Economic Committee Study, August 2000 Available at   Internet; Accessed 09 December, 2003http://www.house.gov/jec/fed/intern.htm .

The Goals of U.S. Monetary Policy" FRBSF Economic Letter, 99-04; January 29, 1999 Available at   Internet; Accessed 09 December, 2003http://www.frbsf.org/econrsrch/wklyltr/wklyltr99/el99-04.html .

U.S. Monetary Policy: An Introduction" Available at Accessed 09 December, 2003http://www.frbsf.org/publications/federalreserve/monetary/Internet;

" (EC, 2007)
Operational efficiency is held to be the most important of all the principles of operation for the EC and can be defined as "the capacity of the operational framework to enable monetary policy decision to feed through as precisely and as fast as possible to short-term money market rates. These in turn, through the monetary policy transmission mechanism, affect the price level." (EC, 2007) Equal treatment and harmonization is a principle that holds that credit institutions must be treated equally regardless of their size or their location in the euro area. Simplicity and transparency are said to "ensure the intentions behind monetary policy operations are correctly understood. The principle of continuity aims at avoiding major changes in instruments and procedures, so that central banks and their counterparties can draw on experience when participating in monetary policy operations. The principle of safety requires that the Eurosystem's financial and operational…...

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Bibliography

Monetary Policy Transparency: Lessons from Germany and the Eurozone' by Iris Biefang-Frisancho Mariscal and Peter Howells was presented at the RES Annual Conference at the University of Nottingham on Tuesday 22 March.

Blinder, a.S., (2000), "Critical issues for modern major central bankers," in European Central Bank and Center for Financial Studies (eds.) Modern monetary policy-making under uncertainty, pp. 64-74.

Brainard, W., (1967), "Uncertainty and the effectiveness of policy," American Economic Review, Papers and Proceedings 57, pp. 411-425. Sack, B., (1998), "Uncertainty, learning and gradual monetary policy," FEDS Working Paper 1998-34. Board of Governors of the Federal Reserve System.

Communicating Monetary Policy to Financial Markets (2007) ECB Monthly Bulletin April 2007.

Monetary Policy
Any change in the central back policy or the bank reserves, which is made to influence the interest rates and thus the investment, employment or production, is called the monetary policy. If the monetary authority wants to increase production, they need to increase the bank reserves. The bank then expands the money supply, which in turn reduces the interest rates. Monetary policy is one of the tools that a national Government uses to influence the economy. In alignment with its political objectives, it uses its authority to control the supply and availability of money to further impact its desired level of economic activity. The policy is usually done by the Central ank of the country.

The monetary policy has undergone a change from past days to now. The modern central banking especially in the U.S. comes after the post-depression era. The 1930's Government led by the economist John Keynes found…...

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Bibliography

Monetary Policy. Retrieved at   Accessed on April 22, 2004http://www.finpipe.com/monpol.htm 

King, Mervyn. Convergence between the theory and practice of monetary policy over the past decade. Address to the joint luncheon of the American Economic Association and the American Finance Association, Boston Marriott Hotel, 7 January 2000 Retrieved at   Accessed on April 22, 2004http://www.bankofengland.co.uk/speeches/speech67.htm .

The Impact of monetary policy on people. Reserve Bank of New Zealand. May 1997 Retrieved at   Accessed on April 22, 2004http://www.rbnz.govt.nz/monpol/about/0092822.html .

Advisers - Monetary Policy. Retrieved at Accessed on April 22, 2004http://www.bized.ac.uk/virtual/economy/policy/advisors/monetary.htm

Monetary policy is crucial to the economy and impacts all types of economic and financial decisions individuals make. For example, depending on the state of the economy, individuals may decide whether to obtain a loan to purchase a new car or house or to start their own company, whether to expand a business by investing in a new plant or equipment, and whether to put savings in a bank, in bonds, or in the stock market. Since the United States is the largest economy in the world, its monetary policy also has significant economic and financial effects on foreign countries.
This paper analyzes and examines various issues related to monetary policy. First, the state of the United States economy is discussed. Next, the issue of whether the Federal Reserve is more concerned about high inflation or the possibility of a recession or other issues is analyzed. Lastly, this paper outlines the…...

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Works Cited

Board of Governors of the Federal Reserve System." Retrieved at October 1, 2002.http://www.federalreserve.govon

Federal Reserve Board: Speeches and Testimony." Retrieved at   On October 1, 2002.http://www.federalreserve.gov/s-t.htm .

FRB: Monetary Policy Report to the Congress." Retrieved at   October 1, 2002.http://www.federalreserve.gov/boarddocts/hhon 

U.S. Monetary Policy: An Introduction." Retrieved at   on October 1, 2002.http://www.frbsf.org/publications/federalreserve/monetary/affect.html 

Monetary Policy and Mortgages
The businesses of mortgages lead to their own problems. ecently it was stated by the attorney for the Western District of Missouri that the owner of a mortgage invest company and three employees of Ameriquest Mortgage were charged with an indictment. The effort made by them was to cheat Ameriquest and some investors through the process of false loans for mortgage. Brent Michael Barber who is 40 years of age is the owner of Somerset Homes and Investment Company as also previous owner of The Beef Pit, a Grandview, Mo., restaurant, along with Chauncey Joseph Calvert, aged 34, Avonda Lynn Nicodemus, aged 32, and oderick Neil Criss, 33, all former employees Ameriquest in Gladstone, Mo., were named in a 62-count indictment given by a federal grand jury in Kansas City. The main accusation was that these individuals had planned to cheat Ameriquest and other investors from the…...

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References

Annaly Mortgage management, INC Code of Business Conduct and Ethics. Retrieved from   Accessed on 2 June, 2005http://www.annaly.com/corpgov/cofbce.html 

Benson, Richard. The Federal Reserve's policy: Punish Savers and Rob the Retired. February 24, 2004. Retrieved from   Accessed on 2 June, 2005http://www.321gold.com/editorials/benson/benson022404.html 

Estrella, Artura. Securitization and the Efficacy of Monetary Policy. Economic Policy Review. May, 2002. Volume 8, Number: 1. Retrieved from   Accessed on 2 June, 2005http://www.ny.frb.org/research/epr/02v08n1/0205estr/0205estr.html 

Independent Assessment key to Credibility of Economic Policy. 10 January 2005. Retrieved from   Accessed on 2 June, 2005http://www.libdems.org.uk/economy/feature.html?id=8045 

Monetary Policy and the Federal Reserve
The Federal Reserve ("the Fed") is responsible for formulating and implementing the nation's monetary policy. Monetary policy is government actions to increase or decrease the money supply and change banking requirements and interest rates in order to influence spending by altering banker's willingness to make loans. An expansionary monetary policy increases the money supply in an effort to cut the cost of borrowing, which encourages business decision makers to make new investments, in turn stimulating employment and economic growth. A restrictive monetary policy reduces the money supply to curb rising prices, over expansion, and concerns about overly rapid growth (Kurtz).

The Federal Open Market Committee (FOMC) is the Fed's main agency for monetary policy making. All national banks must be members of this system and keep some percentage of their checking and savings funds on deposit at the Fed. In order to regulate the economy the…...

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Works Cited

Greider, William. "The Federal Reserve Turns Left." Nation, Vol. 294, Issue 18, 30 April 2012:15-21. EBSCO. Web. 17 February 2013.

Hill, Andrew T., and William C. Wood. "It's Not Your Mother and Father's Monetary Policy Anymore: The Federal Reserve and Financial Relief." Social Education Vol. 75, Issue 2, March/April 2011:76-81. EBSCO. Web. 17 February 2013.

Kurtz, David L. Contemporary Business, 13th ed. Hoboken, NJ: John Wiley & Sons Inc., 2010. Print.

White, Lawence H. "Federal Reserve Policy and the Housing Bubble." CATO Journal, Vol. 29, Issue 1, Winter 2009:115-125. EBSCO. Web. 17 February 2013.

While this represents a significant portion of the government's operating income, higher inflation would generate even more seigniorage by requiring larger volumes (or simply higher denominations) of currency in circulation. If prevailing annualized inflation rises above 4.6% but remains below 9.0%, real seigniorage could climb to $130 billion, or about 6% of all federal receipts in a year like 2009 (U.S. Financial anagement Budget).

In itself, cash carries an interest rate of zero and no central bank can reduce its rate targets below that level. This is the pernicious "liquidity trap" that the Open arket Committee has sought to avoid by guiding U.S. overnight rates close to zero while avoiding a formal move to that level (Svensson). Obviously, once nominal rates have dropped to zero, no further easing is possible, requiring monetary authorities to employ a different set of policy instruments.

any of these instruments are effective to the extent to which…...

Monetary Policy
Discuss some of the major determinants of the demand for money by sector and in total. Discuss some differences in the demand for money which might exist for countries other than the U.S.

An effective formulation of the Monetary Policy depends on the determining factors of the demand for money. Money Demand acts as a channel on transmission mechanism for monetary policy. Therefore the consistency of the money demand function is crucial for the monetary policy for attaining predictable effects on inflation and real output. The classical economists regard money as a numeraire, i.e. A commodity, the unit of which is used to represent the prices and values; keeping its own value unaffected by such a role. Money is assumed to be neutral having no tangible economic consequences. This is done by limiting the role of money as a store of value having the assumption of perfect information and negligible…...

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REFERENCES

"Eco 223 - Finance and the Economy -6 Credit" Retrieved from Accessed on 30 July, 2005http://homepages.uel.ac.uk/K.Bain/creditL.htm

"Fiscal and Monetary Policy Process" Retrieved from  http://www.econedlink.org/lessons/index.cfm?lesson=EM352 

Accessed on 3 August 2005

Ghosh, Parikshit; Mookherjee, Dilip; Ray, Debraj. (December, 1999) "Credit Rationing in Developing Countries: An Overview of the Theory" Retrieved from Accessed on 30 July, 2005http://www.econ.nyu.edu/user/debraj/Papers/Gmr.pdf

If energy prices rise further, it is likely that private spending will be influenced and economic expansion may be negatively affected. The high and volatile prices of crude oil and natural gas appear troublesome for future predictions (Greenspan, 2005).
nother uncertain factor affecting the economy is productivity, which is delineated in unit labor costs, or the hourly labor compensation to output per hour ratio. n increase in productivity over the last decade has favorably influenced the United States' economy, in that efficiency gains restrained inflation. The concern is however that this rapid growth in productivity cannot be maintained. This inherent uncertainty is substantiated by the fact that output per hour, that reached its peak in 2003, seems to be declining. This may result in recession trends, although the duration of the productivity decline is uncertain. related concern is the sharp decline of output measured from the product side of…...

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Although certain uncertainty factors do exist, the general trend is fairly stable, without major threats of either recession or inflation.

Source

Greenspan, Alan. (2005). "FRB: Testimony, Greenspan -- Monetary Policy Report to the Congress, U.S. House of Representatives-July 20, 2005"

hen interest rates are low, people have a greater incentive to borrow and to spend money. That new car or home they have been 'putting off,' seems much more attractive when the interest rate is nearly zero! But perhaps "the most effective tool the Fed has, and the one it uses most often, is the buying and selling of government securities in its open market operations. Government securities include treasury bonds, notes, and bills. The Fed buys securities when it wants to increase the flow of money and credit, and sells securities when it wants to reduce the flow" (Obringer 2009, p.10).

Given the magnitude of the current economic crisis, the Fed has been taking aggressive actions with the specific aim of stimulating consumer spending, and hopefully production and employment to meet increased demand as a result: "The target fed funds rate will be below .25%…effectively at zero. The Fed is…...

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Works Cited

Kliewer, Myron. (1997, Aug). The purpose of money. World invisible.

Retrieved June 14, 2009 at  http://www.worldinvisible.com/newsltr/yr1997/aug/9708fina.htm 

Obringer, Lee Anne. (2009). How the Fed works. How Stuff Works.

Retrieved June 14, 2009 at  http://money.howstuffworks.com/fed.htm

Focused on cutting interest rates in order to obstruct economic decline and to prevent the destructive incursion of inflation, the Federal Reserve has acted independently (though with the administration's endorsement) to counteract mild or regressive growth patterns. After several years of sluggish economic performance and a response on the part of the Federal Reserve by way of a consistent reduction in interest rates, a number of factors have conspired to produce market bust. Precipitated at its base by an irresponsible level of homeowner loaning at a subprime rate, the market's current condition is one of marked pressure upon banks to collect on debts which a great many owners cannot afford to resolve.
As a result, the last six months have seen a tumultuous unfolding of market events, with the housing economy taking the biggest hit. ith few buyers in the possession of real assets and banks now wary to lend…...

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Works Cited

Amadeo, K. (2008). Economy Lost 1.9 Million Jobs Since Recession Began. About the U.S. Economy. Online at  http://useconomy.about.com/b/2008/12/08/economy-lost-19-million-jobs-since-recession-began.htm 

Associated Press (AP). (2002). Text of Statement on Interest Rate Policy. The New York Times. Online at  http://query.nytimes.com/gst/fullpage.html?res=9C06E3DA143AF932A25751C1A9649C8B63 

Brinsley, John. (2008). Volcker says Fed's Be ar loan stretches legal power. Bloomberg. Online at  http://www.bloomberg.com/apps/news?pid=20601087&sid=aPDZWKWhz21c&refer=home 

Faux, Jeff. (2002). Take Back the Tax Cut. Economic Policy Institute Journal, Winter, 2002. Online at  http://www.epinet.org/printer.cfm?id=980&content_type=2

Monetary Policy
In the attached resource files, there is a chart that outlines three perspectives on how the economy should be run: the mainstream macroeconomics perspective, the monetarism perspective and the rational expectation perspective. Which one of these approaches do you most agree with? What in Macroeconomics supports your point-of-view?

The view that makes the most sense is the rational expectation perspective. The reason why, is because this will take into account a number of real world factors that will have an impact upon economic growth. The most notable include: the private economy is stable when you are at the natural unemployment rate, there can be unexpected shocks to aggregate demand / aggregate supply over the short-term, cost push inflation is fueled by the lack of growth in the money supply and changes in monetary policy will have little impact upon inflation over the short-term. (Summary of Macroeconomic Views)

What is supporting these…...

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Bibliography

"Study Finds National Debt Tipping Point" Science Daily, 2010. Web. 2 May 2011.

Summary of Macroeconomic Views, n.

Amadeo, Kimberly. "How the U.S. Federal Debt and Deficit Differ." About.com, 2011. Web. 2 May 2011

Lanman, Scott. "Fed to Buy Extra $600 Billion." Bloomberg, 2010. Web. 2 May 2011

Future Ahead

In the face of global credit crisis, it is expected that Fed has to make further changes such as cut in the more important federal funds rate to maintain stability. The pattern of growth is likely to change showing a slow down. "Mark Zandi, chief economist at Moody's Economy.com, has trimmed his forecast to show economic growth of about 2.5% in the current quarter, down sharply from 4% in the April-June quarter. He said the fourth quarter is likely to be even weaker at around 1.5%" ('Fed surprises markets with half-point rate cut', 2007). The policies of rate-cutting could be more disturbing because of warnings about inflation at a time of slowing growth. The turmoil in the credit markets is not likely to be reduced overnight. The changes might be observed after a while however not without some of the negative repercussion. A lot also depends on the future…...

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References

Abel, a. & Bernanke, B. (1998). Macroeconomics. Addison Wesley Publishing. Third Edition.

Fed surprises markets with half-point rate cut', (2007), Retrieved on September 22, 2007 at  http://www.msnbc.msn.com/id/3032222/ 

Crutsinger, M. (2007). Analysis: Fed rate cut encourages market. Retrieved on September 22, 2007 at  http://www.boston.com/news

In 2006, the Federal Open Market Committee announced in a press release that it was raising its target for the federal funds rate to 4-3/4%, specifically warning of the dire threat posed by inflation. However, this only occurred after many years of historically low interest rates, designed to stimulate the American economy after the recession of 2001. The Fed's low rates, critics contend, were one of the primary reasons for the housing bubble and bust. With the benefit of hindsight, they state that the Fed should have never have allowed interest rates to sink so low, and should have raised rates to more normative levels far sooner than it did. This would have curtailed the American consumer's addiction to credit and stifled the spiraling housing bubble. But the Fed alone is not to blame: the Securities and Exchange Commission (SCC) and regulators did not exercise appropriate watchfulness over the…...

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References

Amadeo, Kimberly. (2009). The Federal funds rate and how it works. U.S. Economy.

Retrieved November 14, 2009 at  http://useconomy.about.com/od/criticalssues/tp/Current_Fed_Interest_Rates.htm 

Press release. (2006, March 28). Federal Reserve. Retrieved November 14, 2009 at  http://www.federalreserve.gov/newsevents/press/monetary/20060328a.htm

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Innovative approaches to policy design (e.g., behavioral economics, collaborative governance)
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