After the training session on monetary policy and its ability to influence the money supply, you decide to focus on the other key role of the Fed, which is regulating the nation's banks. In particular, you want to focus on regulation in the context of impacting the money supply. Given the relative lack of media coverage on regulation (relative to monetary policy), you decide to focus much of the section on providing this education for the media.
Discuss why financial institutions are heavily regulated, with specific focus being paid to their ability to increase or reduce the money supply.© BrainMass Inc. brainmass.com October 10, 2019, 2:27 am ad1c9bdddf
Monetary policy is one of tools of the government, through the Central Bank, to counter inflationary pressures by affecting the money supply available in circulation. It is also a way to energize economic activity, toward an improvement in a country's GNP.
Among the monetary tools, include:
1. Open market operations
2. Interest rates on loans
3. Financial institutions' credit policies and procedures
4. Moral suasion
It is in number 2 and 3 where financial institutions are involved.
Financial institutions play a very important role in the economy. They include banks, finance companies, and others.
- As a financial intermediary, they provide a link between suppliers and users of funds.
- They encourage savings by providing attractive benefit packages in the form of interest rates and others.
- They encourage borrowings by making their loan offers attractive through low interest ...
This solution helps discuss why financial institutions are heavily regulated and why the focus is on increasing or reducing money supply.