Nicaragua And Its Monetary Policy Analysis Essay

Monetary Policy is the procedure by which the financial expert of a nation, similar to the national bank or cash board, controls the supply of money. Regularly focusing on a inflation rate or interest rate to guarantee value solidness and general trust in

Along with moral suasion, persuasion to get consumers to buy, and open market operations, the buying and selling of government securities in financial markets, the easy money policy can only help supply-side economics in it's route to ending a recession and gaining economic stability. All of these policies combined, supply-side, easy money policy, open market operation, and moral persuasion, can all have an impact on important issues. Some of these issues are employment, international trade, and inflation.

Nicaragua is rich in natural resources. Petroleum is the main product gained by imports. Major resources such as salt, gold, and silver are mined. This country exports many items. Some of these include coffee, bananas, beef, cotton, and sugar. One US dollar is converted into 6.55 gold cordobas. In conclusion, Nicaragua has a healthy economy according to their imports and

Nicaragua is the second poorest country in the Western Hemisphere, but is also full of history, tradition and life. It is known for its great folk music, deep heritage and culture. Nicaragua is hidden jewel with warm, gorgeous culture and breathtaking nature. It is surrounded by its incredible history, culture and nature.

Max: Now that we have taken care of fiscal policy we must acknowledge the second half of the efforts to pull ourselves out of the recession. Monetary policy! Monetary policy is the action of the federal Bank of the United States of America to manipulate the economy using the three tools. The three tools are open market operations, discount rate, and reserve requirements. The most commonly used tool is OMO’s, the fed buys bonds from the federal government and then sell to the public. With the profit they make from the bonds sold to the public they buy more bonds. And then it continues in this cycle.

In order to understand how democracy and capitalism have thrived as a political ideology and economic system in the Republic of Nicaragua, people should understand all the struggles that people in the country had to experience since 1979. After the guerrillas took over the country, they overthrew the president and abolished the dictatorship that Nicaragua had endured for a long time. After a couple of years, people in Nicaragua were finally able to elect democratically who they wanted as their president. This was something that marked history in Nicaragua since this was a turning point in its political system, they went from dictatorship to a democratic government. Since before 1979, Nicaragua has always dealt with corruption everywhere. However, Daniel Ortega who was now the president of the republic, brought even more corruption and even more misery to the country. He began to ally with communist presidents, and therefore, became a socio-democrat country for a while. After a couple of years, Nicaragua was more destroyed and devastated that it ever was. Not only did Nicaragua become a capitalist country but also, went back to dictatorship. Daniel Ortega took over the country and destroyed any opposition that was ever created, he believed that he was allowed to do whatever

The Federal Reserve is in charge of the Monetary policy in the United States. The Monetary policy is managed by modifying the interest rate, buying or selling government bonds, and changing the amount of money banks are required to keep in their vaults. This is all controlled by the Federal Reserve. In simple terms the Monetary policy happens when the Federal Reserve places actions that influence the amount of money and credit in this economy. So for example if the cost of credit is reduced, more businesses will borrow more money and that will heat up the economy. The overall goals of the Monetary policy are to have economic growth, have everyone be able to be employed and initiate reasonable prices.

Monetary policy uses changes in the quantity of money to alter interest rates, which in turn affect the level of overall spending . “The object of monetary policy is to influence the nation’s economic performance, as measured by inflation”, the employment rate and the gross domestic product, an aggregate measure of economic output. Monetary policy is controlled by

Monetary Policy, in the United States, is the process by which the Federal Reserve controls the money supply to promote economic growth and stability. It is based on the relationship between interest rates of the economy and the total supply of money. The Federal Reserve uses a variety of monetary policy tools to control one or both of these.

      Monetary policy is under the control of the Federal Reserve System and is completely discretionary. It is the changes in interest rates and money supply to expand or contract aggregate demand. In a recession, the Fed will lower interest rates and increase the money supply. The Federal Reserve System’s control over the money supply is the key Mechanism of monetary policy. They use 3 monetary policy tools- Reserve Requirements, Discount Rates/Interest Rates, and Open Market Operations. The reserve requirement is the percentage of bank deposits a bank must hold in reserves and cannot loan out. By raising or lowering the reserve requirements, the Fed controls the amount of loanable funds. The interest rate is the amount the FED charges private banks, so they can meet the reserve requirements. The prime rate is currently set at 5%. If the Interest rate is low, the banks will borrow more money from the FED and the money supply will increase. Interest rates have been above average for the past 20 years, but are currently considered low. Open Market Operations is the most effective and most used

Monetary policy, ‘The government’s policy relating to the money supply, bank interest rates, and borrowing’ (Collin: 130), is another tool available to the government to control inflation. Figure 4 shows, that by increasing the interest rate (r), from r1 to r2, the supply of money (ms) is reduced from Q1

Monetary policy affects the aggregate demand by altering the supply or cost of money. One of which is the alteration of the rate of interest. By reducing the interest rate, it encourages consumers and businesses to borrow and spend or invest instead of saving their money. As a result, the supply of money increases. When there is more money, it

Monetary policy is the mechanism of a country’s monetary authority (usually the central bank) taking up measures to regulate the supply of money and the rates of interest. It involves controlling money in the economy to promote economic

The existence of a well-specified and stable equation for money demand has important implications for informing the proper monetary policy. This assertion especially holds true in developing countries, where the central banks’ choice of optimal policy instrument often carries more weight for the economy as a whole. In Central America, the reserve banks of the CADR bloc (Costa Rica, Dominican Republic, Guatemala, Honduras, and Nicaragua) have recently adopted inflation-targeting regime with short-term interest rates as the primary instrument. However, the effectiveness of the bloc’s interest-rate transmission mechanism is lower compared to that of the benchmark group of six South American countries (Medina Cas et al. 2011a).

Monetary policy takes central part in discussions on how to promote low inflation and sustainable growth in the economy. Monetary policy operates as a tool to reduce prices during inflation and enhance growth in recession times. Its basic objective is improvement of price stability and achievement of high employment levels in the economy. Thus monetary policy not only fosters economic prosperity but also safeguards people’s welfare.