edf40wrjww2CF_PaperMaster:Desc
Macroeconomic Impact on Business Operations
The Federal Reserve is able to determine the monetary policy for the entire nation. This monetary policy affects today’s business and is based on a number of macroeconomic factors which show the direction in which the monetary policy is heading. By carefully reading the signs of the macroeconomic factors the Federal Reserve is able to determine the best possible monetary policy in a given situation.
In the first section of this paper is explained the way money is created and injected to the U.S. money supply and an explanation of the monetary policies and how these policies are executed. The second part shows how the chosen monetary policy influences the macroeconomic factors and how this was shown in the simulation. The third section is about the influence the U.S. economy has on the European and if this can be avoided.
Money Supply
The Federal Reserve is the central bank in the United States and is called a banker’s bank and the Federal Reserve is the only bank in the U.S. who is able to pay their bills by issuing their own bank notes (Valentinyi, 2003). The Federal Reserve is able to influence the amount of money that goes around in the economy and the major tools for achieving this are the tools of monetary policy. These tools are (1) open-market operations, (2) the reserve ratio, and (3) the discount rate.
Open-market operations (1) is the most effective tool the Federal Reserve can be used to affect the amount of money in the economy immediately because this has direct impact on the reserves of commercial banks. The Federal Reserve can take two kinds of actions to influence the money supply and these actions are (1) selling s ...