250 words each and 2 sources in APA format for each What int

250 words each and 2 sources in APA format for each.

What interest rates are affected by Federal Reserve Board actions? Explain your answer?

What is Federal Deposit Insurance? Does it have any undesirable consequences? Explain your answer.

What is the Quantity Theory of Money? What are its policy implications?

Explain the term Reserve Ratio. What is its significance for the Money Supply? Provide an example.

What are the four functions of money? Explain your answer.

Solution

The fed uses monetary policy to achieve goals of growth stability, high employment and price stability. These goals require to manage money supply and it is done via affecting rate of interest. High rate of interest makes money more expensive and leads to contraction of money supply while low interest rate does opposite.

Federal deposit insurance corporation is a US government agency which insures deposit in banks and supervises risks associated with these insured funds. It was created in response to the uncertainity regarding deposits that occured during great depression. In case if there ain\'t exist any insurer then depositors would have to monitor their funds in the banks.

Quantity theory of money is a classical macroeconomic theory which explains the relationship between quantity of money and price level of goods and services. It is expressed as M*V=P*Y where

M= quantity of money

V= velocity of circulation

P= price level

Y= output or real GDP

Its policy implication is that central bank should not manipulate the money supply in response to changing economic conditions instead implement a small predictible change in money supply and let economy adjust to the economic conditions.

Reserve ratio is the portion of deposit that banks need to maintain with central bank. Money supply is the money in circulation or money with the public. It has four major functions; money as medium of exchange, standard of deferred payments, store of value and means of payment.