...financial markets impact the economy. How the US financial markets impact businesses and one way that they impact individuals. Providing a brief explanation of the primary roles of the US Federal Reserve, the Federal Reserve Chairman, and the Federal Reserve Board. Explaining the ways that interest rates influence the US and global financial environment. We will also give an example of influence for both the US financial environment and one example of the global environment. The Federal Reserve System or Federal Reserve is the central banking system of the United States (US). Congress established this system in 1913 to provide America with an organized, secure, flexible monetary and financial system. This essentially creates stability by balancing systematic risks; according to the Federal Reserve website. There are a total of 12 Federal Reserve Banks located in major cities throughout the US. The banks generate their income based on services provided to other banks, interest accrued on government security bonds and interest accrued on loans and deposits. Each of the aforementioned generates income which is circulated back into the US Treasury. As mentioned in Investopedia, “The Fed’s mandate is to promote sustainable growth, high levels of employment, stability prices to help preserve the purchasing power of the dollar and moderate long-term interest rates.” (www.investopedia.com). The Federal Reserve is regulated through policies made by the Federal Open Market Committee...
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...Running head: Monetary Policy: Monetary Policy Monetary Policy Introduction The objective of this paper is to study the monetary policy and its impact on the economy. Monetary policy is the process by which the Federal Reserve Bank manages the supply of money in order to influence the economy. By regulating the supply of money, the Federal Reserve Bank controls inflation and price-stability, unemployment, and economic growth. The paper also provides some insight into the creation of money. Details The U.S. is the world’s largest economy, and such its monetary policy has widespread implications both domestic and global. The objective of the policy is to influence factors like inflation, economic output, and employment by affecting demand for goods and services. This policy is carried out by the Federal Reserve System. The Federal Reserve (the nation's central bank), consists of the Board of Governors in Washington, D.C., and 12 Federal Reserve District Banks. Although accountable to congress and structured by law, the fed is totally separate from the departments that manage the country's spending decisions. Within the Federal Reserve System is another sub agency called the Federal Open Market Committee (FOMC), which consists of the Board of Governors of the Federal Reserve System and the Reserve Bank presidents. The FOMC holds eight regularly scheduled meetings during the year, and other meetings as needed. Monetary policy is generally referred...
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...Dictionaries are not allowed. 1 1. [17 points] Consider a closed economy. Suppose that there is an increase in business confidence. a. Using the IS-LM framework and AD-AS model show graphically the impact of the above event on output, interest rates, unemployment rate, and price level in the short run. Assume that the economy starts at the natural level of output. Please label the initial equilibrium with the letter A, and the short run equilibrium with the letter B. b. If the Bank of Canada wants to restore full-employment output, will the Bank of Canada increase or decrease the nominal money supply? Using the IS-LM framework and AD-AS model show graphically the impact of the Bank of Canada’s immediate intervention to restore full-employment on output, interest rates, unemployment rate, and price level in the short run. Please label the equilibrium with the letter C. c. Now suppose that the Bank of Canada decides not to intervene. However, the Ministry of Finance wants to restore full-employment output. Will the Ministry of Finance increase or decrease government spending? Using the IS-LM framework and AD-AS model show graphically the impact of the Ministry of Finance’s immediate intervention to restore full-employment on equilibrium output, interest rates, unemployment rate, and price level in the...
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...Running head: MACROECONOMIC IMPACT ON BUSINESS OPERATIONS Macroeconomic Impact on Business Operations Laurie Wilkinson University of Phoenix Macroeconomic Impact on Business Operations The Federal Reserve has the unique ability to control the money supply and stimulate the economy when needed. Any actions of the Federal Reserve can have an impact on macroeconomic factors and the balance in the economy. This paper will discuss the tools used to control the money supply, the effects of monetary policy on macroeconomic factors and the best way to achieve a balance in the combinations of monetary policy. The Federal Reserve has several tools available in order to control the money supply. The Reserve Ratio allows the Fed to raise or lower this ratio to affect the amount of money and ability a bank has to lend. The Open Market Operations is also available, where the Fed can buy or sell government bonds to the public and commercial banks. Depending on which they do this action can either increase the assets on hand or increase the reserves for the banks. Increasing the reserves allows banks to lend more. Finally, the Discount Rate is available to use. The Fed can make short term loans to banks, increasing the amount that the bank can lend out which in turn increases the money supply. If the bank increases the discount rate then banks will not want to borrow as much and it restricts the amount of money they have to lend. Monetary Policy can be looked at as a way the Federal Reserve...
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...scheme Test 1 Date due: Instructions § § § § § § § § Please attempt all 100 multiple choice questions. This is an open book test. However, this is not a group assignment. All questions carry equal marks. Only one correct answer. No negative mark for non-attempt or wrong answer. Please fill-in the bubble answer sheet using a 2B pencil. No pen or ink. Make sure you name and ID number are correctly given on the computer sheet. A correct set of answers will be made available following submission. This will enable students to check and review their answers. 25 % of Internally Assessed Component 9th November 2012 Name (Block letters): ____________________________ ID Number ____________________________________ Date: ______________ 1. Macroeconomics does not try to answer the question of: A) why do some countries experience rapid growth. B) what is the rate of return on education. C) why do some countries have high rates of inflation. D) what causes recessions and depressions. 2. All of the following are important macroeconomic variables except: A) real GDP. B) the unemployment rate. C) the marginal rate of substitution. D) the inflation rate. 3. Deflation occurs when: A) real GDP decreases. B) the unemployment rate decreases. C) prices fall. D) prices increase, but at a slower rate. 4. How does the distinction between flexible and sticky prices impact the study of macroeconomics? A) The study of flexible prices is confined to microeconomics, while macroeconomics focuses...
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...graph of the money market and show the impact of the financial investors’ actions on each of the following: (i) Demand for money Interest Rate Money Supply Money Demand (ii) Nominal Interest Rate Money Supply Nominal ------------ Interest Rate ------------------------------ (b) When the Federal Reserve sells bonds, what will happen to the price of bonds in the open market? Explain. Using a correctly labeled graph of the money market show how the open -market purchase of these bonds will affect the money supply and money demand. When the Federal Reserve sells bonds the price of money (interest rate) is decreased. When the Federal...
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...WTI-Brent Spread An Analysis of Factors That Influence Oil Price Differentials Yiming Huang Dongming Li Hanzheng Li Shihui Qian Fordham University Financial Econometrics I December 17, 2015 WTI-BRENT SPREAD 2 Contents Abstract ......................................................................................................................................................... 3 1 Introduction ........................................................................................................................................... 3 2 Factors ................................................................................................................................................... 4 2.1 Dependent Variable ....................................................................................................................... 4 2.2 Independent Variable .................................................................................................................... 5 2.2.1 Financial market variables ........................................................................................ 5 2.2.2 Economic Variables .................................................................................................. 7 2.2.3 Underlying Assets Variables..................................................................................... 7 2.2.4 Weather Variable .....................................................
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...Reflection-Week 3 An interest rate is the profit or compensation made from the borrowing of a monetary asset (Colander, 2010). The interest rates are expressed as a ratio or percentage per dollar amount being lent. Although there are several types of interest rates, there are two main classes that each falls underneath: short-term and long-term interest rates. A short-term interest rate is the amount repaid on a debt that has a maturity date of less than one-year (NASDAQ, 2011). A long-term interest rate is amount paid for borrowing money over a longer period such as a mortgage or government issued bonds (Colander, 2010). There are a number of factors that cause the interest rates to fluctuate within an economy. The strength of the economy itself plays a large factor in the fluctuation of the interest rate of any given economy. When a country’s economy is strong, the citizens have jobs, money is being spent, and saved in the market. As more money or demand for money increases so does the interest rate. The opposite is true when demand is low the interest rate will fall. The inflation rate is also a factor in the rise and fall of interest rates in a country. Because interest rates on loans are generally a fixed rate the lender must account for inflation to prevent a loss on the repayment of the loan. Most lenders will charge a higher interest rate on a loan to offset the effects of inflation. Therefore, a steady rise in inflation will cause an increase in interest rates and deflation...
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...Shasank S Jalan – 37B Saurabh Malik – 34B Saurabh Kumar – 35B Submission by – Group 5 Yashwant Kasturi – 49B Srinivas Gadepalli – 42B Shasank S Jalan – 37B Saurabh Malik – 34B Saurabh Kumar – 35B Macro-Economic review of Israel Macro-Economic review of Israel Economic Backdrop In the last decade, Israel has secured * Strong growth—averaging 3.8 percent * Inflation in the 1–3 percent range * Public debt falling below 80 percent of GDP * Budget deficits declining into the 1–3 percent range * Freely floating and competitive Shekel (Israeli Currency) The economy was open and flexible—reflected in * Exports of around 40 percent of GDP * Stable Property markets (capped by earlier supply overhangs) * Highly activist and effective Financial—and especially banking—supervisory structures The Israeli economy is a diverse open market economy. Being a relatively young state in the modern era, Israel is recognized as a developed market by many major indices. It has also became a member of the OECD in 2010. As of 2011, Israel has the largest number of companies listed on the NASDAQ after the United States and Canada. Resilient Economy The Israeli economy showed great resilience during the latest global economic crisis. It withstood the economic crisis due to * Stable banking system * Labor market elasticity * Lack of complex...
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...The U.S. financial system has many complexities and it is impacted by several environmental factors including federal regulations and the economy. The U.S. financial markets impact the economy, businesses, and individual by the movement of funds among financiers, businesses and governments. It involves investments in the area of sales or marketing of securities, the management of investment risk through portfolio diversification and the analysis of securities. Melicher, R. W., & Norton, E. A. (2011).Pg. 6 The U.S. Federal Reserve is the central bank of the United States and is responsible for regulating the banking system, setting monetary policy by influencing money and credit conditions in the economy in pursuit of full employment and stable prices. ("What is the," 2013) The role of the U.S. Federal Reserve is important for the U.S. payment system. It provides banking service for the twelve Federal Reserve Banks by providing banking service to depository institutions and to the federal government. The depository institutions maintain accounts including collecting checks and provide various payment services, distributing and receiving currency and coin, and electronically transferring funds. Melicher, R. W., & Norton, E. A. (2011). The Federal Reserve Chairman is a position with high ethical standards and morals; a high standard are a must. A successful chair must have the confidence and trust of the president and Congress and bank officers, foreign officials,...
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...Expansionary economic policy During the Great Depression, the United States suffered severe and lasting unemployment, along with falling prices and a sharp decline in real output. Because the unemployment level lasted so long, the Keynesians disagreed with the Classical theorist. The Classical economists argued that recessions would be temporary and self-correcting; therefore, the government should have a limited role in the money supply. Whereas, the Keynesians argued that during a time of long-term financial crises the government should intervene by injecting money into the market. Still many economists continue to debate about which economic policy to implement during a crisis in the financial market. Therefore, in an effort to move the economy out of a recession, the federal government engages in expansionary economic policies to alleviate the strain. A recession is a general slowdown in economic activity, during which the federal government will implement fiscal policies and the Federal Reserve Bank will implement monetary policies to stabilize the economy. Indeed, policy measures implemented to increase Gross Domestic Product (hereinafter referred to as GDP), and economic growth are expansionary. When the federal government implements fiscal policy it is to stimulate growth and employment by changing tax rates, levels of transfer payments, or government purchases of goods and services in order to change the equilibrium level of national income (Amacher & Pate, 2012)...
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...One of the financial committee in the United States that has influence and control by the Federal Reserve System, is the Federal Open Market Committee, FOMC. I think the Federal Open Market Committee is one of the most important information about economy for the people to know and to understand. Getting to know how the Fed controls the money can give you input in what to expect for a change. The Federal Open Market Committee set the monetary policy. The Fed engages in open market operations, which is the power in buying and selling of government securities. What the banks use to lend to each other overnight, which is the interest rate, is the federal fund's rate that is stored in a particular place by the FOMC. The main and very vital job of...
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...Monetary Policy Exercise Part I: The Three Main Tools of Monetary Policy 1. How would the Fed use the three monetary policy tools to pursue an expansionary policy and a contractionary policy? Monetary Tool Expansionary Policy Contractionary Policy Open Market Operations Discount Rate Reserve Requirement________________________________________ 2. Circle the correct symbol (⇑ for increase or ⇓ for decrease). What would happen to the money supply and interest rates if the Fed… a. purchased government securities on the open market? Money Supply ⇑ ⇓ Interest Rates ⇑ ⇓ b. raised the discount rate? Money Supply ⇑ ⇓ Interest Rates ⇑ ⇓ c. lowered the reserve requirement? Money Supply ⇑ ⇓ Interest Rates ⇑ ⇓ 3. With an easy money policy (expansionary monetary policy), the equilibrium supply of money(increase/decrease) while interest rates ________________. The (higher/lower) interest rates should cause investment expenditures to __________, this change in investment spending will cause Aggregate Demand to (increase/decrease). Therefore, an easy money policy is consequently appropriate for countering a(an) _______________ gap. 4. If a bank received a deposit of $10,000 when the reserve requirement is 25%,how much… a) will it hold as required reserve? __________ b) will it have in excess reserves? __________ c) is the money multiplier? __________ d) will total deposits in the entire banking system rise? __________...
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... Project Description 4 Project Sizing 5 Stakeholder Analysis 6 RBS 7 Probability Impact Matrix 8 Risk Register 9-13 Summary Risk Report 14-16 Conclusion 17 Introduction Bandito Barney’s is a lively and successful bar that has a great outdoor patio and bar that is in need of updating and replacing if the bar is to continue to be successful in the future. The current patio is constructed of wood planking that has some rotten spots and is also very hard to clean up because of the fact that it has been in place for the past 30 years. The wooden patio will be torn down and instead of being constructed from wood will be replaces with dyed and stamped concrete to keep the rustic feeling of the bar. The new structure that will be covering the bar and seating area will be constructed from large wooden beams to keep this rustic feeling. All of the coolers and drink systems will be replaced with brand new ones in order to be more efficient. Along with the appliances a new food and drink ordering system will be installed to help the service be more efficient and faster also making it easier for the employees as well. Glass doors and walls will be installed so that the outdoor patio and bar will be able to remain open during the winter months so more revenue will be coming in. The heat for the outdoor patio will come from the installment of radiant heat within the concrete...
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...one (1) way the U.S. financial markets impact the economy, one (1) way the U.S. financial markets impact businesses, and one (1) way the U.S. financial markets impact individuals. Companies sell stock to raise money. Once a stock begins trading in the secondary market, its change in price has no direct effect on the company that issued it. Regardless of the wavering of the stock price, the issuer would still have the money raised to fund their company. Without a doubt, every company wants to see their stock prices rise. Despite mixed opinions, there is a strong positive relationship between financial market development and economic growth. The markets help to efficiently direct the flow of savings and investment in the economy. Credit-rating agencies are known to be influenced by stock prices, and their decisions have a large effect on the availability of credit to the firm. Regulators, who take actions that affect firm cash flows (most prominently, in the case of banks), follow market prices very close. Business owners with good ideas are constrained by the amount of capital they can raise. Although they can use their own money and borrow from their family and friends, these are limited sources of capital. Eventually, as they desire to grow their companies or reach their potential, they have seek to fund-growth using other people’s money. They can borrow from fellow citizens under a contractual obligation to pay them back with interest, or they could make these citizens co-owners...
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