How does the Federal Reserve control the quantity of money?

timer Asked: May 9th, 2018
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Purpose of Assignment

Week 3 will help students develop an understanding of what money is, what forms money takes, how the banking system helps create money, and how the Federal Reserve controls the quantity of money. Students will learn how the quantity of money affects inflation and interest rates in the long run, and production and employment in the short run. Students will find that, in the long run, there is a strong relationship between the growth rate of money and inflation. Students will review the basic concepts macroeconomists use to study open economies and will address why a nation's net exports must equal its net capital outflow. Students will demonstrate the relationship between the prices and quantities in the market for loanable funds and the prices and quantities in the market for foreign-currency exchange. Student will learn to analyze the impact of a variety of government policies on an economy's exchange rate and trade balance.

Assignment Steps

Resources: National Bureau of Economic Research

Develop a 2,100-word economic outlook forecast that includes the following:

  • Analyze the history of changes in GDP, savings, investment, real interest rates, and unemployment and compare to forecast for the next five years.
  • Discuss how government policies can influence economic growth.
  • Analyze how monetary policy could influence the long-run behavior of price levels, inflation rates, costs, and other real or nominal variables.
  • Describe how trade deficits or surpluses can influence the growth of productivity and GDP.
  • Discuss the importance of the market for loanable funds and the market for foreign-currency exchange to the achievement of the strategic plan.
  • Recommend, based on your above findings, whether the strategic plan can be achieved and provide support.

Use a minimum of three peer-reviewed sources from the University Library.

Format your paper consistent with APA guidelines.

Tutor Answer

School: Boston College

Hello, am done with the paper.Its my pleasure to work with you, and looking forward to work with you in future.Invite me for more when you have.GOOD LUCKS


Federal Reserve Control

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Federal Reserve control
The federal government reserve controls the money supply in the economy. The system
manages the commercial banks and lending institution to reserve specific reserve ratio against
potential withdrawals. Through this process, the Fed controls the quantity of money supplying in
the economy. The Fed can increase the money supply by buying issued treasury bills or
securities from large financial dealers conversely it can reduce the money supply by selling the
When there is too much money supply in the economy, people increase their expenditure.
This leads to an increase in demand against low supply rate. Shortage is created and the available
goods prices increases leading to inflation.
Analysis of the history of GDP, Interest rates, savings, investment real interest rates and
Analysis has shown various investment and government strategies to regulate the amount
of money in the economy and its impact on the economy. In this case, the paper will focus on the
United States economic forecast of next five year period by discussing current and past economic
state. Forecasting will affect the set plans of different industries and service sectors. Due to the
current market times, the gross domestic product (GDP) is expected to fluctuate and change on a
regular basis in the next five-year analysis plan.
The gross domestic product has slightly improved in the last quarter; this is due to
financial volatility and resilience in the global economic crisis and slowdown. According to the
national bureau of statistics, the federal government expects the gross domestic product to
increase by 0.2 percent in 2018. Last year the reports indicated that the economic growth range



was 2.0% and 2.3%. Additionally, Forecast panelist expects the U.S GDP to grow by an
estimated 2.0% in 2018.
Employees have adopted a more reliable mechanism to improve their savings and raise
their financial standards through increased savings and controlled expenditures. Consequently
organization has adopted defined-contribution plans for their activities.
Currently, the U.S economy has been slowly changing and growing in conjunction with
forecast panelists. Every party is giving the reasons behind the issues and the solutions towards
such problems. In 2014 an increase of 2.4 % was reported from the previous 2.3% in 2013. Some
of the causes of this increase were as a result of increased investment in real estate,
manufacturing a and financial sector. Secondly, the reports published suggest that the increased
consumer spending rate contributed to the enormous growth of the economy in the United States.
Additionally, exports together with increased government expenditure contributed to the
variation. However, the gains were offset by increased imports by Federal government departs
from the bureau.
The United States GDP stands at more than 17940 billion dollars, and the value
represents 28.95 percent of the world economy. Since 1960 the economy has increased the GDP
by 6000 billion dollars which is a positive move, but with the ...

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