How reserve requirements affect the economy

Reference no: EM132451712

Scenario 1:

A NAFTA dispute has greatly curtailed exports from our economy. This has caused the economy to go into a downturn! Use Reserve Requirements to increase the rate of economic growth.

Choice : The Federal Reserve lowers the reserve requirement, reducing the amount of money banks are required to keep in reserve and increasing the amount of excess reserve.

In 150-200 words explain your reasoning for the way you are planning on using Reserve Requirements while addressing the following:

Question 1. How Reserve Requirements affect the economy.

Question 2. How your action will affect economic growth.

Question 3. Why it is important to increase economic growth.

Question 4. Your rationale for the use of Reserve Requirements.

Scenario 2:

A scientific discovery has made it cheaper to produce consumer electronics. This has led to a rapid rise in the purchase of household electronics. This has caused the economy to grow rapidly! Use the Discount Rate to slow the rate of economic growth.

Choice: The Federal Reserve raises the discount rate, increasing the interest rate it charges banks when they borrow money from the Federal Reserve.

In 150-200 words, explain your reasoning for the way you are planning on using the Discount Rate addressing the following:

Question 1. How the Discount Rate can affect the economy.

Question 2. How your action will affect economic growth

Question 3. Why it is important to slow economic growth

Question 4. Your rationale for use of the Discount Rate.

Scenario 3

A strong dollar has significantly increased the amount Europeans must pay for American goods. This has caused the economy to shrink! Use Open Market Operations to increase the rate of economic growth.

Choice: The Federal Reserve buys bonds from the bank.

In 150-200 words, explain your reasoning for the way you are planning on using Open Market Operations addressing the following:

Question 1. How Open Market Operations affect the economy

Question 2. How your action will affect economic growth

Question 3. Why it is important to increase economic growth

Question 4. Your rationale for the use of Open Market Operations.

Reference no: EM132451712

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