Macroeconomic Impact on Business Operations

The week 4, University of Phoenix ?Monetary Policy? simulation was competed and this study will summarize the concepts presented. This will include a comment of the tools used by the United States Federal take to manipulate the gold supply and how each influences the money supply and subsequently, macroeconomic factors. It will discuss how money is ?created? and will conclude with a discussion of how the monetary policies can be combined to dress hat achieve an acceptable balance between economic growth, small-scale inflation and a reasonable consider of unemployment.

Tools Used by the Federal Reserve to Control the Money SupplySeveral key tools argon described in the ?Monetary Policy? simulation. These include the synthesis rate and its relationship to the federal official funds rate, the required hold back ratio, and finally open grocery store operations. The discount rate is underwriteled by the Federal Reserve (the Fed). McConnell & Brue describe the discount rate as the interest charged by Federal Reserve Banks on loans do to commercial banks. (2005, p. 274). This is in contrast to the federal funds rate, which is the interest rate charged by banks for loans made to other banks. The required reserve ratio is the percentage of the deposits that both bank must hold as reserves and is determined and set by the Fed.



Finally the term ?open market operations? refers to treasury bills, government bonds, and other Federal financial instruments that are sold by the Federal Government to investors. To ca-caher, these are various tools used by the Fed to control the money supply of the United States economy.

How the Tools Influence the Money Supply and macroeconomic FactorsThe Fed uses the tools described in the last section to control the supply of money in the economy, which, in turn, affects macroeconomic factors much(prenominal) as gross domestic product and the inflation...

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