monetary base

Examples of monetary base in the following topics:

• Changes in the Monetary Base

  • If the Fed's balance sheet changes, subsequently, both the monetary base and money supply change.
  • Next, we substitute the monetary base formula into Equation 3 because the monetary base equals deposits held by depository institutions plus currency in circulation, or B = D + C.
  • After substituting the monetary base into Equation 3, we yield Equation 4.
  • Total Liabilities = Monetary base (B) + U.S.
  • Equation 6 shows how a change in the Fed's balance sheet affects the monetary base.

• Chapter Questions

  • Identify the changes to the monetary base and money supply if bad weather causes the float to increase.
  • Identify the changes to the monetary base and money supply if the U.S.
  • Identify the changes to the monetary base and money supply if the commercial banks reduce the amount of discount loans from the Fed.
  • Identify the changes to the monetary base and money supply if the U.S.

• The Fed's Balance Sheet

  • Moreover, the Fed can directly influence the monetary base, and in turn, the monetary base influences the money supply.
  • When the Fed increases its assets, the monetary base rises.
  • When the Fed decreases its assets, the monetary base declines.
  • The Fed's assets decrease, contracting the monetary base.
  • The Fed does not use loans to influence the monetary base.

• Control of the Money Supply

  • By purchasing government bonds (especially Treasury Bills), this bids up their prices, so that interest rates fall at the same time that the monetary base increases.
  • The value of the money supply is determined by themoney multiplier and the monetary base.
  • The monetary base consists of the total quantity of government-produced money and includes all currency held by the public and reserves held by commercial banks.
  • While purchases of government securities prove to expand the total monetary base, the selling of government securities will ultimately contract a nation's monetary base.
  • An increase in reserve requirements would decrease the monetary base; a decrease in the requirements would increase the monetary base.

• Growth Through Monetary Policy

  • Monetary policy seeks to further economic policy goals through influencing interest rates.
  • By adjusting monetary policy in favor of low interest rates and a large monetary base, the Fed is taking expansionary actions designed to help the United States recover from the recession.
  • There are several monetary policy tools available to achieve these ends:
  • The primary tool of monetary policy is open market operations.
  • All of these purchases or sales result in more or less base currency entering or leaving market circulation.

• Arguments For and Against Discretionary Monetary Policy

  • These typically used fiscal and monetary policy to adjust inflation, output, and unemployment.
  • A rule-based policy can be more credible, because it is more transparent and easier to anticipate, unlike discretionary policy.
  • Policy is implemented based on indicator events in the economy and the policy is expected and carried out in a timely manner.
  • In this case the central banking authorities have autonomy and are able to use monetary policy to enable their mandate of economic growth and full employment.
  • Milton Friedman was a Nobel Prize (1976) recipient in the field of Economics and was a supporter of rules-based monetary policy.

• Monetary Employee Compensation

  • Monetary compensation can be either guaranteed (base) pay or variable pay and positively correlates with job satisfaction.
  • Monetary compensation includes both guaranteed (base) and variable pay.
  • In addition to base salary, other pay elements are based solely on employee/employer relations, such as salary and seniority allowance.
  • Variable pay is a monetary reward that is contingent on discretion, performance, or results achieved.
  • Identify the different cash compensation models (i.e., guaranteed and variable) and the behavioral implications of using monetary compensation

• Monetary Policy

  • Monetary policy is the process by which the monetary authority of a country controls the supply of money.
  • Monetary theory provides insight into how to craft optimal monetary policy.
  • There are several monetary policy tools available to achieve these ends: increasing interest rates by fiat; reducing the monetary base; and increasing reserve requirements with the effect of contracting the money supply; and, if reversed, expand the money supply.
  • The primary tool of monetary policy is open market operations.
  • All of these purchases or sales result in more or less base currency entering or leaving market circulation.

• Monetary Policy

  • Monetary theory provides insight into how to craft optimal monetary policy.
  • Monetary policy differs from fiscal policy.
  • There are several monetary policy tools available to achieve these ends including increasing interest rates by fiat, reducing the monetary base, and increasing reserve requirements.
  • The primary tool of monetary policy is open market operations.
  • All of these purchases or sales result in more or less base currency entering or leaving market circulation.

• The International Monetary Structure

  • The international monetary structure involves international institutions, regional trading blocs, private players, and national governments.
  • Membership is based on the amount of money a country provides to the fund relative to the size of its role in the international trading system.
  • Certain regional institutions also play a role in the structure of the international monetary system.
  • The Bretton Woods system was the first example of a fully negotiated monetary order intended to govern monetary relations among independent nation-states.
  • Explain the role played by the United States over the history of the international monetary structure