Purpose of the Monetary and Fiscal Policies in America :: Economy

Purpose of the Monetary and monetary Policies in America The Monetary and Fiscal Policies, although controlled by two different organizations, atomic number 18 the ways that our economy is unplowed under control. Both policies have their strengths and weaknesses, some(a) situations favoring use of both policies, scarce most of the time, only one is necessary. The monetary policy is the act of rule the money supply by the provideeral Reserve Board of Governors, soon headed by Alan Greenspan. One of the main responsibilities of the Federal Reserve System is to cast the money supply so as to keep production, prices, and employment stable. The Fed has three in like mannerls tomanipulate the money supply. They are the set aside requirement, outdoors securities industry operations, and the discount rate. The most powerful tool available is the reserve requirement. The reserve requirement is the percentage of money that the bank is not allowed to loan out. If it is lowered, banks are required tokeep less money, and so more money is point out into circulation (theoretically). If it is raised, then banks may have tocollect on some loans to meet the new reserve requirement. The tool known as open market operations influences money and credit operations by buy and selling of government securities on the open market. This is used to control boilersuit money supply. Ifthe Fed believes there is not enough money in circulation, thenthey will buy the securities from member banks. If the Fed believesthere is too much money in the economy, they will sell the