Macroeconomic Policies Used by the Federal Reserve Essay - 5

Macroeconomic Policies Used by the Federal Reserve - undertake ExampleThe alternative strategy actions that were set up intended to put more pressure towards the long interest rate achievement and to ensure that the overall monetary conditions of the country become improved. This includes bolstering the prices for residential properties and corporal equities (Kashyap & Stein, 2012, p. 266).The Federal Reserves adoption of the undefended market operations involves buying of existing exchequer securities by the Federal Reserve in the secondary market (Bauer & Rudebusch, 2014, p. 234). The secondary markets are securities that have already been obtained and sold off to private investors. When buying the securities, the Federal Reserve ensures it does so but under the compare of an existing currency. This expands the Federal Reserves base and at the very(prenominal) time increases the ability of monument financial institutions to provide contributes as well as expand their existi ng credit facilities (Bauer & Rudebusch, 2014, p. 234).Normal open market operations involve functions are typically carried out through repurchasing agreements (DAmico & King, 2013, p. 426). If the Federal Reserve wishes to recall liquidity or add the same liquidity during the normalization period. Repos, also known as purchase agreements are contracts signed between two or more parties to purchase securities and then repurchase the same securities at a future date and price (DAmico & King, 2013, p. 425). Repos are considered as an economic equivalent to a collateralized loan. Differences between the first and second transactions determine the interest rates accrued on the loan (Bauer & Rudebusch, 2014, p. 235).