The knowledge you have collected in this course on monetary

Assignment Help Macroeconomics
Reference no: EM1334492

Question about The Federal Reserve

Read the following remarks made by news analyst Louis Uchitelle on October 12, 2007 regarding the vital role of the Fed Chairman Benanke in a time of economic crisis such as the financial meltdown started a year ago in the US and the global financial market. The remarks below are followed by the question #1 to answer.

The Federal Reserve, through its power to raise and lower interest rates, exercises more influence over economic growth and the level of employment than any other government entity. That unusual role dates from the 1970s, when the executive branch and Congress pulled back from the use of fiscal tools ? vast New Deal spending and targeted tax cuts ? as a means of regulating prosperity.
President Woodrow Wilson signed the Federal Reserve Act on Dec. 23, 1913, creating a seven-member board of governors, including the Fed chairman, and 12 regional banks ? a structure collectively known as the Federal Reserve System. The governors are appointed by the president and approved by Congress; the regional bank presidents are selected by leaders of their communities, particularly bankers.

Private banks controlled the flow of credit and thus interest rates in the late 19th and early 20th centuries, and farmers, the backbone of the populist movement, complained that the big Eastern banks often starved them of credit at critical moments. Populists called for direct access to credit, without the banks as intermediaries. That did not happen.
The Federal Reserve System was a compromise. The banks would remain the lenders to the public, but the Fed would control the supply of funds on which the banks depended to make loans. Injecting more money into the banking system put downward pressure on interest rates, while its opposite, restricting the supply of potential credit, pushed up rates. The regional banks were intended to help make the flow of credit even across the country.
Through various refinements over the years, this "open market" operation, as it was called, has been at the heart of the Fed's power. The interest rate that results is called the federal funds rate. In turn, the interest that banks and other lenders charge for mortgages and for various forms of commercial and consumer credit fluctuate with the federal funds rate. As a supplement, to assure an even flow of available credit, commercial banks in various parts of the country can borrow directly from the Fed at the nearest regional bank, using the so-called discount window. The discount rate is linked to the federal funds rate.
The federal funds rate is set by the Fed's Open Market Committee, composed of the chairman, currently Ben S. Bernanke, the six other governors, and five of the 12 regional bank presidents, on a rotating basis. The committee meets at Fed headquarters in Washington every six weeks or so.
The Fed's chairman, currently Ben S. Bernanke and before him Alan Greenspan and Paul A. Volcker, dominates Open Market operations. Their main thrust has been to limit inflation, even at the risk of a recession ? although they have cut rates when the nation seemed in danger of one, as the Bernanke Fed has recently done.

Louis Uchitelle Oct. 12, 20071) The URL link for these remarks is:

In reading the remarks above, and the knowledge you have gathered in this course on monetary and fiscal policy actions, critically describe the transmission process of the Fed's monetary policy action on Oct 29, 2008 of reducing its federal fund rate to 1% - the lowest rate since 1958. Your discussion on the transmission process should focus its impact on credit market crunch, interest rates, investment, consumption in combating the year-long financial meltdown in the Wall Street and its spillover impact on the Main Street. From your learning level of this course, is this policy action a significant departure from the doctrine of deregulation that previously pursued by the former Federal Reserve Chairman Alan Greenspan? Analyze very briefly.


Reference no: EM1334492

Questions Cloud

James lawson''s bed and breakfast: profit and demand patterns : James Lawson's Bed and Breakfast, in a small historic Mississippi town, must decide how to subdivide (remodel) the large old home that will become its inn.
What would be the last statement executed : define the output of the screen when the program executes with a value of 200.
Economic growth and development for these nations : what are the implications for economic growth and development for these nations.
Important for hr and compensation professionals : Why is it important for HR and compensation professionals to learn about compensation practices in other parts of the world? Support your answer.
The knowledge you have collected in this course on monetary : the knowledge you have collected in this course on monetary and fiscal policy actions, critically describe the transmission process.
What are data definition languages : What are data definition languages and How are they related to DBMSs? Needs a 350 word description
Find the major political and risks : Find the major political and risks  associated with investing in a foreign country.
Make a list of files that are world-writable : make a crontab to perform the tasks listed below at the frequencies specified. Note that you do NOT need to write the actual scripts.
Hr evaluation for kudler foods : Show how the compensation of each job aligns with the new strategy and will enhance performance


Write a Review


Macroeconomics Questions & Answers

  Make comparision between the situation after both of changes

make comparision between the situation after both of these changes have happened with the situation before any of these changes have happened.

  Concept of equilibrium whenever dealing with quantity-price

Under the concept of equilibrium whenever dealing with quantity and price.

  Computing the changes in quantity

Suppose the firm raised the price to $4.00 while increasing its advertising expenditure by $100. Would this be beneficial? Explain. Illustrate your answer with the use of a demand schedule and a demand curve.

  Calculation of gain and loss

The annual demand for coffee by the U.S consumers is Q = 250 - 10P. Compute the lost consumer surplus?

  Changes in slope or position of ad curve

Explain what would happen to the slope or position of the AD curve in the following circumstances.

  Illustrate what happened to employment during the rest

Illustrate what happened to employment during the rest of 2008. What are some of the alternatives to a tax cut that might have been used.

  Illustrate what are the limits to long-term economic

Illustrate what are the limits to long-term economic growth in the US.

  Provide that the risk free interest rate premium on market

Barramundi Inc. stock is currently selling at $40 per share (its equilibrium price) provide that the risk free interest rate is 8% and the equilibrium risk premium on the market portfolio is 6%.

  Should us laws be changed to need a shorter work

Should US laws be changed to need a shorter work week and longer vacation time.

  Subsiquent transactions took place in current fiscal year

You are provided with the subsiquent transactions that took place during a current fiscal year.

  Price discrimination by airline

Assume an airline flying on the Charlotile - Chicago route has estimated the demand curves for three different types of customers: business


The socio-economic shortcomings that China experienced

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd