The Effect Monetary Policy has on Macroeconomic Factors Essay

The Effect Monetary Policy has on Macroeconomic Factors Monetary policy includes the manipulation in the money supply by the Federal Reserve that will influence interest rates, which will cause a snowball effect in total overall spending. The change in interest rates, in many cases are a determining factor in the decision-making process to purchasing a house, a new car, borrow money for home improvements and many other decisions on purchases which will impact the total level of spending in the economy. The Federal Reserve has two main assets, securities and loans to commercial banks, thrifts-savings and loans, mutual savings and loans and credit unions. Securities are government bonds that have been purchased by the Federal†¦show more content†¦Soon people were paying for goods with goldsmiths receipts, which serviced as the first kind of paper money (Brue 2004). At this point the goldsmiths-embryonic bankers- used a 100 percent reserve system; they backed their circulating paper money receipts fully with the gold that the y held in reserve in their vaults. But because of the publics acceptance of the goldsmiths receipts as paper money, the goldsmiths soon realized that owners rarely redeemed the gold that they held in storage. In fact, the goldsmiths observed that the amount of gold being deposited with them in any week or month was likely to exceed the amount that was being withdrawn (Brue 2004). Today, the U.S. Bureau of Engraving creates Federal Reserve Notes and The U.S. Mint creates coins. Checkable deposits make up over half the nations MI money supply, and are created by loan officers who issue loans to consumers. How Gross Domestic Product is affected The economys performance is measured by its yearly combined output of goods and services, also called aggregate output. Aggregate output is labeled gross domestic product (GDP); the total market value of all final goods and services produced in a given year. GDP includes all goods and services produced by either citizen-supplied or foreign-supplied resources employed within the country (Brue, 2006). The point of implementing policy through raising or lowering interest rates is to affect peoples andShow MoreRelatedThe Effect Of Macroeconomic Indicators On Economic Growth On A Petrol Dollar Economy Essay1391 Words   |  6 PagesTHE EFFECT OF MACROECONOMIC INDICATORS ON ECONOMIC GROWTH IN A PETROL-DOLLAR ECONOMY: THE NIGERIAN EXPERIENCE 1. Introduction The Central Bank of Nigeria Act of 1958(CBN) vested the monetary policy powers of economic stability on the apex regulatory bank (CBN).Since our independence in 1960,CBN has operated a fixed exchange regime which was at various times was at par with the British pounds and later the United States Dollar. 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