Open Market Operation
When the federal reserve makes more purchases of the bonds, the supply of money in the economy increases. This happens when the prices of the bonds rise, and this affects the interest rates, and this means that many banks, as well as people, will borrow more, thereby increasing the money circulation in the economy. Akhtar supports that “the Federal Reserve uses the tools of monetarypolicy to induce changes in interest rates, and theamount of money and credit in the economy”(1).Evaluating from the results that have been achieved from these financial decisions and actions, it is evident that the move by the federal reserves is a resultant of the dynamic form of open market operation. Ideally, this form of market operation is impactful only on the level of the reserves as well as the monetary base. In this case, for instance, the federal reserves are purchasing the bonds and by doing so, reduce the interest rates, and increasing the supply of money in the economy.
In my opinion, I believe that this is an excellent monetary strategy to aid in controlling inflation. The use of the open market operations has proven to be effective in that they control the money in circulation and at the same time, the number of reserves that the federal reserves have. By doing this, the central bank and the federal reserve ensure that they maintain the value of the dollar and control the amount of money in circulation in the economy. The depreciation or appreciation of the currency of a nation is the main reason why most governments will employ the use of the monetary tools to establish control. As such, I believe that it is a good thing to use the dynamic, open market operation in this case to control the supply of money in the economy. . Don't use plagiarised sources.Get your custom essay just from $11/page
The relationship shared between the corporate tax, and the banks is that of the amount generated as a result of changes in the tax rates. The rate of corporate tax affects the nature and the amount that is released in the form of a loan. In other words, the corporate taxes impact on the stability of the banking system. When the banking system is affected negatively, the amount of money in the supply of the economy is reduced. As such, most of the people will shun from taking loans. Arguably, people will dislike the idea of seeking loans from the banks if the amount charged is too high.
Work Cited
Akhtar. Apache HTTP Server Test Page powered by CentOS, files.stlouisfed.org/files/htdocs/aggreg/meeks.pdf. Accessed 4 Mar. 2020.