Role of Commercial Banks in the Economic Development of a Country:

Since the Central Bank has the exclusive right to issue money in the economy, it can have extensive influence on the determination of interest rate in financial markets and in the economy as a whole, by adjusting the interest rate on short-term loans to financial institutions. Central Bank interest rates on these loans therefore have the most immediate impact on other short-term interest rates in the money market. By influencing interest rates, monetary policy then has an effect on the savings and expenditure decisions of individuals and corporate.

The fact that banks control 97% of the world's money supply makes them a vital institution. Banks are the engine of our modern financial system and a source for economic growth. The bank's ability to create credit can have destructive effects; the Great Depression of 1929 and the Great Recession of 2008. In both cases, banks spurred on an asset bubble through overextending credit to aid the purchase of assets. The result was an economic collapse that wiped out wealth and reduced credit creation which stalled productive investments. The lessons of the two great economic collapse support the notion proposed by the author, that bank credit for transactions that do not contribute to the economy should be restricted.

In the essay I will discuss the main differences between the U.S and China banking systems. I will start by focusing on the over arching structure both banking systems use. I will talk about the check and balance system both countries use in order to regulate banks. I will go into depth on the different ways both countries used monetary policy in order respond to current and past economic slow downs. Compare and contrast the different stipulations that each banking system put in place in order to create economic prosperity and prevent a turn for more economic slowdown.

B. This would not only add more revenue, but also provide thousands of jobs to those unemployed which would of course greatly benefit the overall US/Global economy.

Describe the creation of the Federal Reserve System and its role as agent and bank regulator;

a. We were already lagging behind the market to begin with. Unless we give an increase in the basic

(D) spending on the good increases, buyers are worse off while sellers are better off.

The Federal Reserve System (called the Fed, for short) is the country 's national bank. It was set up by an Act of Congress in 1913 and comprises of the Board of Governors in Washington, D.C., and 12 Federal Reserve District Banks. Congress organized the Fed to be autonomous inside of the administration - that is, in spite of the fact that the Fed is responsible to the Congress and its objectives are set by law, its behavior of money related approach is protected from everyday political weights. This mirrors the conviction that the general population who control the nation 's cash supply ought to be free of the general population who outline the administration 's spending choices (Investor Words, 2008). The obligation regarding controlling the country 's cash supply requires the Federal Reserve to impact the measure of store assets accessible to banks and in this way the level and bearing of transient loan fees. Whether banks and other budgetary foundations will make advances relies on upon the net revenue—the distinction in the rate of premium they must pay to draw in stores or acquire assets and the loan cost they can charge clients for credit. The more noteworthy the net revenue that banks can understand on new advances, the more they will need to loan. To impact loan fees on stores and financing costs that banks pay to obtain reserves, the Fed utilizes its congressionally in truth, power to make cash (Johnson, 2002).

C: Increase in the levels of corporations in the country and increase in the levels of production of the people.

A. An increase in the rate of business formation tends to be accompanied by an increase in the

4) What effect would a decrease in interest rates by the Federal Reserve most likely have in the nation’s manufacturing sector, all other factors remaining constant?

Lending institutions have been around since the late 1700’s. Banks are establishments that are authorized by the government to accept deposits, pay interest on deposits, clear checks, make loans, act as an intermediary in financial transactions and provide other financial services to customers.

Economic Prosperity: A sound banking system promotes economic well-being by providing them short, medium and long- term loans. Economic Prosperity: A sound banking system promotes economic well-being by providing them short, medium and long- term loansEconomic Prosperity: A sound banking system promotes economic well-being by providing them short, medium and long- term loansEconomic Prosperity:

1.      What impact will an unanticipated increase in the money supply have on the real interest rate, real output, and employment in the short run? How will expansionary monetary policy affect these factors in the long run? Explain.

The banking industry in a country can be affected by various factors. Some of these factors are: