Economics Custom Essay

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1. Before the FOMC meeting, each Reserve Bank prepares a ?Summary of Commentary on Current Economic Conditions,? two weeks before the meeting called the beige book.

The Greenbook is published a week before the FOMC meeting, which is circulated the week before the meeting of the FOMC.

Next comes the first two go rounds, which are the core of the FOMC meetings. All the Fed Governors and Reserve Bank presidents discuss how they see economic and financial conditions.

The first go round of meetings covers valuable information about economic activity throughout the country. It ends with the FOMC Chairman summarizing the discussion and providing the Chairman?s own view of the economy.

Policy discussion begins with the Federal Reserve Board?s director of the Division of Monetary Affairs, who outlines the Committee?s various policy options. The possible options are given to the board the Friday before the meeting called the Bluebook.

Second go-round each governor spells out his or her most preferred policy.

At the end of the policy go-round, the chairman summarizes a proposal for action based on the Committee?s discussion, as well as a proposed statement to explain the policy decision. The Fed Governors and presidents then get a chance to question or comment on the Chairman?s proposed approach. Once a motion for a decision is on the table, the Committee tries to come to a consensus through its deliberation. The final decision is most often one that all can support, there are times when some differences of opinion may remain, and voting members may dissent.

After the 12 voting members come together for a formal vote on proposed decision and the wording of the statement.

After the vote the FOMC publicly announces its policy decision at 2:15pm. The announcement contains the federal funds rate target, the statement explaining its action, and the vote tally, including the names of the voters and the preferred action of those who dissented.

The FOMC then releases its official minutes three weeks after each meeting.

The FOMC now releases Committee participants? projections for the economy and inflation four times a year, which provides added insight into the policymakers? perspectives.

Once the FOMC establishes a target for the federal funds rate, the Open Market Trading Desk at the Federal Reserve Bank of New York conducts daily open market operations, buying or selling U.S. government securities on the open market, as necessary to achieve the federal funds rate target.

2. William Dudley earned a B.A. degree from New College in 1974, and a PhD in Economics from the UC Berkeley in 1982. Before his work at the Fed Reserve Bank in NY, Dudley worked at Goldman Sachs from 1986-2007 holding the position of chief economist. Dudley was hired by Tim Geithner, previous president of the Fed Bank of NY, to oversee the department in charge of buying and selling government securities before he became the president of the bank in NY. Dudley was appointed to the position on January 27, 2009. William Dudley is considered to be a monetary dove in the sense that he is more concerned with economic growth than he is about inflation. Generally a dove is more likely to vote for a lower interest rate even if it puts upward pressure on interest rates.

3.B. A government of a politically unstable country would be more likely to keep rates low in order to foster growth in that area in order to look as if they were the reason for the growth. In the eyes of the people who are not knowledgeable on the subject of economic growth and how it occurs they may see the leaders of these politically unstable country as a strong leader although this is very deceptive because if the rates are low for too long than there is a possibility for the country to experience high rates of inflation that could damage the country in the long run. The heavily indebted country would most likely benefit from high inflation if they are indebted in their own currency because they could force their currency down and they could pay it back to where it is cheaper to themselves. The policies of this type of government are unpredictable and volatile and depending on their size compare to other governments could cause negative shocks to other economies.

4. The recent monetary policy decision is to drop interest rates even lower than they were previously, by 25 base points, to 1%. The justification for this approach is the uncertainty of recovery in the future and the expectation that the economy will not be as strong as it should be. The expansionary policy is used to help bolster the economy and foster growth. Although the main objective of the ECB is price stability it is also important to have a healthy economy and without expansionary policy it is possible that deflation can occur and then the ECB will have to take more serious action in order to keep a handle on price control in the negative direction.

5. My Grandmothers Balance sheet would change by -$1000 to reserves and -$1000 to deposits. +$1000 to my reserves and +$1000 to my deposits. There would be no change to the fed balance sheet because the only difference is $1000 dollars being in a different name in the bank, but initially -$1000 from Fed reserves, and -$1000 from Fed deposits, it is then added back in when I deposit it.

6. The Federal Reserve Bank?s assets and liabilities would both increase by 10 million dollars. Securities would go up by $10million, and reserves would go up by $10million. The banks asset side would +$10million to reserves, and -$10million to securities. The monetary base goes up by $10million which is an expansionary policy because an expansion of the monetary base leads to an even larger expansion of quantity of money.

S.P. rewrite the content, change the style and the words but the same content

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