The Central Bank: Fiscal Policy

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Economics is defined as the branch of knowledge concerned with the production, consumption, and transfer of wealth. By definition it may sound simple, but in reality it is far from it. Beyond our personal economic life there is a whole world of complex economic systems that rely on each other to keep the economy afloat and to protect investors in the process. From small businesses (microeconomics) to government spending (macroeconomics) to different economic policies like Fiscal and Monetary America’s economy has it all.

When talking about employment fiscal policy plays a HUGE role. This term fiscal policy is normally associated with macroeconomics. Fiscal policy deals with the way government adjusts taxes and spending to have a desired
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The Central bank is responsible for regulating and overseeing the nation’s commercial banks by making sure that banks have enough money in reserve to avoid bank runs and they increase or decrease the money supply to speed up or slow down the economy as a whole, this is known as monetary policy. Interest rates have a huge impact on the speed of the economy, when the Central Bank wants to slow the economy they will increase interest rates, this discourages borrowing and slows the flow of money, this is know as Contractionary Monetary Policy. To increase spending and the flow of money in the economy they will offer low interest rates, this encourages borrowing and speeds up the economy, this is know as Expansionary Monetary Policy. The overall goal of the Central Bank is to create a healthy banking system, the keys to this are confidence and liquidity. Confidence is in the hands of the bank 's customers, this is that the people have faith in the bank that their money will be there when they need it. Liquidity has to do with the bank 's Liquid Assets, an asset that can be sold/converted into cash fast and with little effect on the price it was bought for. (For little …show more content…
Microeconomics focuses on an individual level of economics, like playing a role in the stock market or by taking part in a financial system. Long ago we used to (and sometimes still use) use the barter system, this is where you would trade things that you have for things you want. This was improved on in america by the incorporation of Money into our economy. Money was a good thing because it could be used as a Medium of Exchange, to Store Value, and as a Unit of Account. This money can be borrowed and lent between people, as an individual people borrow money so they can have more capital to start a business, they then pay back this money that is borrowed with an interest, off of this interest is how the bank makes money. (Governments often borrow money for deficit spending.) Individuals can invest in large corporations via a financial instrument known as stocks. These stocks are a slice of ownership in the company, by purchasing a stock you are investing capital in the company if the company does good and stock prices rise you can then sell your stock and gain a profit and vice

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