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

Purpose of the Monetary and Fiscal Policies in the States The Monetary and Fiscal Policies, although controlled by two different organizations, are the shipway that our economy is kept under control. Both policies have their strengths and weaknesses, some situations favoring usance of both policies, but most of the time, only one is necessary. The monetary constitution is the act of regulating the money supply by the feederal take for Board of Governors, currently headed by Alan Greenspan. One of the main responsibilities of the Federal view as System is to regulate the money supply so as to forestall production, prices, and employment stable. The Fed has three tools tomanipulate the money supply. They are the prevail requirement, openmarket trading operations, and the discount rate. The most powerful tool purchasable is the reserve requirement. The r eserve requirement is the percentage of money that the bank is non allowed to loan out. If it is lowered, banks are required tokeep less money, and so more than money is put out into circulation (theoretically). If it is raised, then banks may have to take in on some loans to meet the new reserve requirement. The tool cognize as open market operations influences money and credit operations by buying and staging of government securities on the open market. This is apply to control overall money supply. Ifthe Fed believes there is not exuberant 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