Federal Reserve Bank Techniques

The article, "Reserve Requirements," lays out in straightforward language what the reserve requirement is and how analysts theorize that the reserve requirement will affect the economy. This is contrasted with the practical (real-world) effects of the reserve requirement, which the article deems fairly insignificant. The relevance to the understanding of money and financial markets is critical since the reserve requirement does influence the narrow money supply (M1), although it has less of an effect on broader measures of money including M2 and M3. Nonetheless, since M1 is a statistic which is often cited in the financial press (Koretz, 1996, p. 32), understanding how the reserve requirement can affect this statistic is important to those who are interested in financial markets and transact

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s results in a $100 deposit turning into $1000 while a 20 percent reserve requirement results in only $500 are carefully laid out ("Fedpoint 45," n.d., p. 2). The result is an article which can be appreciated by those with an interest in the financial markets and who come away from the article with a better understanding of how this Fed tool works. Article's Strengths and Weaknesses The article does a good job of presenting the background behind the current federal reserve requirements, including going into detail about the Monetary Control Act and the Garn-St. Germain Act. Information presented about the way the federal reserve requirement is calculated is clear and concise, and includes examples which are useful. The article also focuses on how the reserve requirement is supposed to aid in the expansion or contraction of the money supply, but also notes that the reserve requirement is not one of the stronger tools that the Fed has at its disposal in order to accomplish this task ("Fedpoint 45," n.d., p. 2). The primary weakness of the article comes from its supposition that the reader may be more knowledgeable than is actually the case. For example, the article speaks of the Federal Reserve's Board of Governors as though
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Some common words found in the essay are:
Key Issues, Analysis Presentation, Bank York, Act Information, Reserve Requirements, Federal Reserve, Nonetheless M1, Reserve Board, reserve requirement, Board Governors, Business Week, federal reserve, money supply, reserve bank, reserve requirements, requirement calculated, reserve requirement calculated, financial markets, federal reserve bank, fedpoint 45, 45 nd 2, bank york, fedpoint 45 nd, nd 2, reserve bank york,
Approximate Word count = 1266
Approximate Pages = 5 (250 words per page)

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