sample paper:Money & Banking

sample paper:Money & Banking
Q1

Fiat money currency being a legal tender, has numerous roles in the business cycle despite it not being in existence for a long time. Payments for all transactions are made possible through this noble currency. Circulation of the currency in the economy depends on the availability of demand and supply at a given time. In addition, fiat currency can be used when the government is on the verge of controlling inflation, thus promoting development. Banks play a vital role by providing deposits that increase money lending capacity, setting up a circulation base. Despite fiat currency being accepted worldwide, fake commodities hinder its operations. When demand for a particular commodity increase, the government will initiate a measure that will ensure a balance, thus affecting its flow. Regulations of the Fiat-money monetary system are a technique that most governments employ on individuals to curb the free market while making payments when need be. 

With a Fractional reserve banking system, the bank can retain a fraction of its assets to control currency flow. It is easier for the banks to keep an eye on all the activities through the measure, hence increasing development approaches. In this approach, lending is enhanced due to the availability of withdrawals in the form of capital. Fractional reserve banking can hinder cash flow due to retained assets for a particular period hence not circulating in the economy. In addition, there is a lack of accountability in surplus, hence not being the best mode of business control. 

Central banks play a vital role in bringing stability to the economy by controlling financial output operations. The government can authorize a particular tender currency in circulation through the central bank, thus improving the economy’s growth. Despite the central Bank’s approach towards economic growth, it poses a great danger in that the government is the one that controls its operations. Lack of political goodwill will mean that the government can initiate measures that can implicate development within a particular economic framework. 

With the International Monetary Fund, there is a reduction of global poverty to encourage trading among countries. All these procedures make it essential for the growth economy. All the functionality of the IMF is vital in lending, capacity development, and overseeing the development of the economy. It is crucial to develop proper attributes that ensure a growing economy and development at the set locality (Ebrahimian & Wachter, 2020). Being a global entity, the IMF does not rely on a particular country’s growth for its sustainability. As a result, some countries end up not benefiting from some initiatives. 

Q2

A moral hazard is a situation where one party uses shrewd means to gain access to a particular opportunity at the expense of another entity. It is difficult to know when honesty prevails through such dealings, thus minimizing finance and trade. The central bank has the mandate of ensuring that affected organizations are bailout at the expense of not knowing exactly what happened in the long run. Bailing out large corporations is essential since there is profit maximization while reducing expense costs. In a situation business owner pays a salesperson a set salary, it is clear that the salesperson gets the incentive to put forth less effort, take longer breaks, thus motivation to increase their sales numbers than if their compensation is associated with their sales numbers (Geer et al., 2017). It is challenging to develop a viable model that ensures that the concerned parties do not feel neglected with such payments.

There is also the imbalance where more prominent corporations thrive while the smaller ones bear the consequences on international monetary policies and operations. In the free market, it is easier to develop business operations that ensure that all the reduction promotes a particular outline, and improvingand growth. One of the best examples is when the salesperson gives false information about a particular job, acting dishonestly. Despite all this, the salesperson must make the company’s management or the business owner know when errors are in a particular operation. As a result, compensation is given equally with any segregation (Lewin & Cachanosky, 2020).

Q3

Project managers work within three project boundaries: scope, budget, and schedule. Time is higher than the model due to the peculiar entities. Each attribute has its position where the width is to the triangle’s left while the budget is to the right. The results of the happenings Depend on the project; hence each of these project issues can be very important with the user involvement in each category. Quality remains at the center of a project triangle; hence successful project managers put measures that ensure the decline and flow of trade between these three factors to achieve success.

During bail application time, there is always a blame game between corporate and political lobbying that is so obvious at the expense of increasing tension. However, the reason why it is one of the biggest challenges in our political system is fundamental, just like there is rotation in the department to respond to “survival of the fittest,” hence concealing failures in their heads. There is also an issue with funding underperforming companies at the end, hiding market inefficiencies. Different research shows how political connections influence money circulation in an economy. 

Q4

The Federal Reserve Act authorizes the Federal Reserve to pursue a monetary policy to promote the principles of higher employment, long-term interest rates, and stable prices. With the existence of the chairpersons named, it was challenging to develop a solid approach to improve the monetary value chain supply. The Federal monetary policy did not have the Dual Mandate of promoting economic activities. As a result, the economy did not have the correct channels to stabilize cash flow all the time. This aspect meant the consumption rate of commodities with increased inflation. Conditions required for interest rates to stabilize at intermediate levels did not meet the requisite threshold hence minimum output in terms of supply and cash flow.

Q5

GDP is the output value below the average consumption value. When calculating GDP, it is essential to develop both private and public consumption, thus finding out investments in a given time frame. 

The measure for a particular product will be essential in combining all the necessary entities to gain differently at a given time limit. If such GDP from all sectors and tax computed within the set production limits. Are grouped and added taxes and reduced subsidy (product), we can get GDP. 

When the amount of product tax (minimum subsidy on products) is added to the total value-added, the total value added by all population units provides the gross domestic product (GDP). Thus, any nation’s Gross Domestic Product (GDP) represents the total amount of gross value added (GVA) in all sectors of that economy during the year specified after adjusting taxes and grants. 

Q6

Austrian business cycle theory explains that over-generating by the central bank like Federal Reserve has the Mandate of lowering interest rates, resulting in resource allocation, which can be poor.  Capital being cheaper; hence numerous companies tend to pursue more production methods. As a result, ordinary economists are often lost in the Keynesian forest hence not getting the necessary help from Irving Fisher Street activists Milton Friedman and Martin Feldstein. The brilliance of the economy is a reflection of the business cycle theory developed under Ludwig von Mises and deepened by his followers such as Murray Rothbard and Jesus Huerta De Soto. 

Contrary to popular economic theory, economists consistently believe that low-interest rates, referred to as incorrect rates and debt accumulation that actual savings can support, are not harmful to resource allocation and employment. Efforts to accelerate economic growth through monetary policy must reflect self-harm by enticing businesses to invest excessively in higher production levels and invest less in lower levels. An economic downturn is a reorganization of the production structure and consumer needs.

Q7

Since the time of President Richard Nixon, the International Monetary Fund, a unique agency of the United Nations, was established at the Bretton Woods Conference in 1944 to achieve international monetary cooperation and stabilize the exchange rates. Accessing strong currency to achieve is a vital entity through which businesses thrive. IMF has gone through numerous changes through the help of united nations, thus improving on living standards of people at the same time, growth in economic aspects. 

Q8

December 2007 to June 2009 recession was the longest compared to World War II in the history of humanity. There was a decline in Gross Domestic Product to 4.3 percent, notwithstanding the prevailing conditions. The level of unemployment increased upto 10 percent, thus influencing the great recession period. Homeowners had challenges finding out the requirements to set up the correct mortgage for any purchaser of the houses, thus reducing the cash flow.

Financial institutions saw it better to increase the interest rates to assist the government in curbing the rate of inflation. With this measure, it was easier to develop a module of ensuring that there was less cash flow in the economy. On the other hand, the federal reserve made it difficult for some organizations to comprehend how well prices o commodities could be maintained at a particular level. All these approaches made it possible for the government to check on how best the economy would, hence improve with the help of international monetary funds. Political leaders also had a role to play by ensuring that there was good political will that could allow for humble and quiet working conditions for every trader and business personnel. Taxpayers or voters play an essential role in the growth of an economy. Taxpayers support government projects by paying all the required levies while reducing corruption cases.

Q9

The government employs different methods to raise the economic level control from 0 percent to 100 percent. These tools make it essential to develop solutions that involve both monetary recovery policy and monetary policy. As the name suggests, monetary policy is a policy undertaken by the  Federal Reserve, thus ensuring that lowering of interest rate is enhanced, thus reducing unemployment opportunities. The policy covers other government spendings, hence a straightforward way of introducing growth and reclaiming the economy. From the discussion above, it is clear that Great Recession offers the best tax revenues as a form of incentive. 

Q10

The resumption of the Great Recession is one way of fixing monetary value policies, hence the reduction of finances through the GDP and employment process. The public finances are also reduced as a result of enhanced federal reserves. This general monetary policy action aims to reduce borrowing costs to individuals and businesses, thus promoting both expenditure and immediate investment. However, the continued low levels of state finances — which cannot be significantly reduced — and the severity of the Great Recession have placed a strong emphasis on monetary policy as a tool to combat the recession.

References

Ebrahimian, M., & Wachter, J. (2020). undefined. 

Geer, J. G., Herrera, R., Schiller, W. J., & Segal, J. A. (2017). Gateways to democracy. Cengage Learning. 

Lewin, P., & Cachanosky, N. (2020). undefined. Capital and Finance, 47-64. https://doi.org/10.4324/9780429031687-7

Schoenholtz, K., & Cecchetti, S. (2016). undefined. McGraw-Hill Education. 

United States. Congress, United States House of Representatives, & Committee on Financial Services. (2017). Fractional reserve banking and the Federal Reserve: The economic consequences of high-powered money. Createspace Independent Publishing Platform.
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