Essay about Csc Chapter 5

624 Words Oct 14th, 2012 3 Pages
CSC CHAPTER 5 * Fiscal policy affects the economy in the following way: * Its spending and/or direct transfers to citizens * Taxes of various types, including direct income, sales, payroll, capital, and property taxes * Deficits, which tend to stimulate the economy, while falling deficits (or surpluses) generally do the opposite * Automatic stabilizers, which automatically move counter to the business cycle (unemployment insurance payments increase as unemployment rises, while income taxes rise as economic growth increases) * Responsibilities of the central bank include: * Issuing the nations currency * Acting as banker to the central government * Operating monetary policy * Its general duties …show more content…
* The bank shifts federal fund between accounts at the BAC and demand deposits at the clearing banks, in order to give institutions unexpected positive or negative settling balances. * If the clearing banks find themselves with a positive balance, they will lend out the excess fund and buy securities, putting downward pressure on interest rates * The Bank achieves this using “redeposit” which moves deposits from its own account to those of the clearing banks * The reverse can happen if the clearing banks find themselves with a negative balance, which the Bank induces using “drawdown” (which is the reverse of a redeposit) * Open Market Operations: * The Bank can influence rates by trading money market securities in the open market * The bank affects overnight rates by: * Offering to lend overnight money through a special purchase and resale agreement (SPRA) as stated rates below existing market rates in order to reduce rates * Offering to borrow overnight from financial institutions through sale and repurchase agreement (SRA) (by selling securities to the chartered banks and agreeing to repurchase them the next day)at given rate that are

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