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These ultimate goals as they are often described are

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Unformatted text preview: the views and interests of the various parts of the nation. Decisions regarding open market operations are made by the twelve–member Federal Open Market Committee, or FOMC. The decisions of this Committee are transmitted to the Trading Desk of the Federal Reserve Bank of New York which conducts the actual buying and selling of securities in order to influence bank reserves and thus the monetary aggregates. 2-22 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 2. THE MONEY MARKET With regard to discount policy, the Board of Directors of the Reserve Banks make recommendations as to changes in the discount rate. However, final approval rests with the Board of Governors. Additionally, the Board of Governors has sole authority with regard to reserve requirements. OBJECTIVES OF MONETARY POLICY The objectives of U.S. monetary policy are high employment, stable prices (no inflation), and steady growth in the nation's productive capacity, and a stable foreign exchange value for the dollar. These ultimate goals, as they are often described, are not directly under the control of the Federal Reserve. Monetary policy can only pursue what is called an intermediate target strategy. This strategy consists of targeting some economic variable that is subject to the Federal Reserve's control, that is related to the ultimate goals in ways that are understood and reasonably predictable, and that is effective in helping the economy reach those ultimate goals. Since the middle 1970s, the Federal Reserve has pursued an intermediate target strategy based on the monetary aggregates. Over this period M1 and M2 have been the Federal Reserve's principal targets. The System first determines growth targets for these monetary aggregates that are thought to be consistent with its objectives for unemployment, inflation, economic growth, and a stable foreign exchange value for the U.S. dollar. It then uses the monetary policy instruments at its disposal to achieve the targeted growth in money, expecting that such growth will advance the economy toward the ultimate goals. THE T...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.

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