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United Republic dollar: Difference between revisions
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== Monetary Policy == | == Monetary Policy == | ||
The [[Federal Finance and Reserve Act]] created the Federal Reserve System in 1894 as the central bank of the United Republic, with its principal task being to conduct the nation's monetary policy to promote maximum employment, stable prices, and moderate long-term interest rates in the [[Economy of Alstin|Alstinian economy]]. It is also tasked to promote the stability of the financial system and regulate financial institutions, and to act as lender of last resort. | |||
The Monetary policy of the United Republic is conducted by the United Republic Open Market Commission, which is composed of the [[Minister of the Treasury]], [[Federal Reserve Board of Governors]] and 6 out of the 13 Federal Reserve Bank presidents, and is implemented by all thirteen regional Federal Reserve Banks. | |||
Monetary policy refers to actions made by central banks that determine the size and growth rate of the money supply available in the economy, and which would result in desired objectives like low inflation, low unemployment, and stable financial systems. The economy's aggregate money supply is the total of: | |||
* M0 money, or Monetary Base – "dollars" in currency and bank money balances credited to the central bank's depositors, which are backed by the central bank's assets, | |||
* plus M1, M2, M3 money – "dollars" in the form of bank money balances credited to banks' depositors, which are backed by the bank's assets and investments. | |||
The UROMC influences the level of money available to the economy by the following means: | |||
* Reserve requirements – specifies a required minimum percentage of deposits in a commercial bank that should be held as a reserve, with the rest available to loan or invest. Higher requirements mean less money loaned or invested, helping keep inflation in check. Raising the federal funds rate earned on those reserves also helps achieve this objective. | |||
*Open market operations – the Federal Reserve buys or sells UR Treasury bonds and other securities held by banks in exchange for reserves; more reserves increase a bank's capacity to loan or invest elsewhere. | |||
*Discount window lending – banks can borrow from the Federal Reserve. | |||
Monetary policy directly affects interest rates; it indirectly affects stock prices, wealth, and currency exchange rates. Through these channels, monetary policy influences spending, investment, production, employment, and inflation in the United Republic. Effective monetary policy complements fiscal policy to support economic growth. | |||
When the Federal Reserve makes a purchase, it credits the seller's reserve account (with the Federal Reserve). This money is not transferred from any existing funds—it is at this point that the Federal Reserve has created new high-powered money. Commercial banks then decide how much money to keep in deposit with the Federal Reserve and how much to hold as physical currency. In the latter case, the Federal Reserve places an order for printed money from the U.R. Treasury Ministry. The Treasury Ministry, in turn, sends these requests to the Bureau of Engraving and Printing (to print new dollar bills) and the Bureau of the Mint (to stamp the coins). | |||
== eCommerce == | == eCommerce == | ||