Monetary Policy in the United States Essay Example | Topics and Well Written Essays - 500 words

Monetary Policy in the United States - Essay Example2. As a central agency the FED can earnestly affect the manner in which it can affect the banking system. Firstly, it supervises the sale of different government instruments. In this manner it affects the rate of interest in the market and ensures the step-up in credit and money supply.Secondly, it also fixes the manner in which these instruments be purchased from the public and corporations, thereby affecting the interest rate again. Thirdly, the FED can monitor the effectively monitor the amount of lending, thereby influencing the price of the securities and bank stock.3. Very simply put the reserve requirements are the amount of vault cash and deposits that the banks are stipulated to hold with themselves. Less money in the reserves would imply more money avail commensurate - the bank will have more loan able funds at its disposal, thereby having favorable implications on the cost of transactions and the bargaining capacity o f these institutions with other bodies. The changes in the reserve requirements are made or else infrequently by the government, it may even be the fact that this measure has been employed only once or twice in a ten-spot (Jhonson 2005).The discount rate is the price the central bank, other financial banks pays while engaging themselves in money relat