F3 DR - FINANCE - 100% ORIGINAL AND A+ QUALITY WORK

F3.1 The term "monetary policy" refers to what the Federal Reserve, the nation's central bank, does to influence the amount of money and credit in the U.S. economy. What happens to money and credit affects interest rates and the performance of the U.S. economy. The Congress established the statutory objectives for monetary policy maximum employment, stable prices, and moderate long-term interest rates in the Federal Reserve Act. The Federal Open Market Committee is firmly committed to fulfilling this statutory mandate. In pursuing these objectives, the FOMC seeks to explain its monetary policy decisions to the public as clearly as possible. Clarity in policy communications facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability.

F3.2 As a college student I would like the Federal Reserve to focus on certain components of monetary policy that concern the amount of interest that college students have to pay for college loans. Also most college students live on credit cards and the interest rates are outrageous. Going to college needs to be made more affordable and more attractive to people wishing to obtain a degree. Current monetary policy has reduced the amount of spending power that college students have.

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F3.3 As a businessperson I would like to see the value of the dollar improves. The Federal Reserve could start reducing the money supply that it has inflated by printing money during the economic recovery. By flooding the economy with printed money the Federal Reserve has been keeping the value of the dollar low in order to stimulate American’s exports competitiveness. To add value back to the dollar The Federal Reserve would have to increase the interest rate and Congress would have reduced the money that was created during the rescission.

F3.4 In response, the FOMC has acted decisively to provide extraordinary monetary policy accommodation to help the economy regain its footing. The target fed funds rate has been near zero for nearly five years. Nonetheless, massive shortfalls in aggregate demand have left the unemployment rate persistently above the 5 to 6 percent range that characterizes a well-functioning labor market. At the same time, inflation has been well below our 2 percent long-run target.

With the fed funds rate pinned down at its zero lower bound, the FOMC has turned to nontraditional tools — namely, forward guidance on short-term interest rates and large-scale asset purchases (LSAPs). Our strategy is to promote a faster recovery by lowering long-term interest rates. A classic textbook decomposition of long-term rates is to view them as the sum of expected future short-term rates and a premium that compensates for interest rate risk. The new tools are aimed at influencing both of these components of long-term rates.

F31.1 Financial institutions are run by people and the institution is only as competent and responsible as the people that are representing it. Also some financial institutions treat their customers differently based on the customers profitability. I had a service fee charged to my checking account and they waived the fee because I have a certain amount of money in my account and I carry two credit cards with them. The bank manager told me that if I did not have the money or the credit card accounts with them he would not have been able to waive the fee. Essentially customers that make the financial institution are provided a higher level of customer service and privileges and customers who are not that profitable are marketed to in a fashion with the hopes that they will become more profitable. Most financial institutions are fee based and they don't charge their customers with a certain amount of money the fee, but charge the smaller customers the fee to make money.

F31.2 The more profit a customer can bring to a bank the more personal services the bank is willing to provide. Someone who lives paycheck to paycheck and carries a low balance in their account will just get the front line workers in a banking location to assist with their issues. The bank sees very little profit from them, as they do not provide any money to loan, or have many additional accounts to bring in profits. Someone who carries a balance of $1,000+ in their account and uses other services like investments, loans, or credit cards, bring additional revenue to the bank. The bank wants to keep these customers as they are usually profitable. They will provide a higher level of customer service to these members and may have dedicated customer service reps or managers who handle their accounts and any issues they have. The more profit a customer brings to the bank the higher the level of service a bank may be willing to provide to keep the customer happy and keep them as customers.

F31.3 Financial institutions are businesses that need to make money for operating costs and other expenses. They cater to customers who make them profit or have large balances on deposit. A profitable customer is someone who pays many fees per month because of overdrafts, loan interest or other fees that generate income for the bank. There are also customers who have six figure balances in their accounts that the bank uses for loans to other customers. Therefore, to maintain positive relationships with those customers; a bank may offer free checking accounts, lower interest rates on loans, higher yielding accounts like Jumbo Certificates, and other lower fees. Some banks offer personal bankers to deal with high profile clients on a more personal level to answer any and all questions. These perks keep the customers coming back and expanding their relationship by opening more accounts; thus creating a profit for the bank.

F31.4 I think that banks all see the value of a customer as equal upon gaining them as account holders. The difference between the levels of service offered all seems to be in the hands of the customers. All banking customers have different levels of financial accountability and responsibility. Although this is something that comes with experience when handing money, the banks do take this into account when offering various services to us. I also think that this all ties in to a customers individual credit history, which as we all know, is really where the rubber meets the road. The bank is taking a substantial amount of risk when dealing with new applicants and current customers; the ability to honor our debts, and keeping a consistent history of financial responsibility are portrayed with varying degrees in all of us. Customers showing reliable repayments on the terms of their loans are seen by the banks as having a stable lifestyle and this shows that they are less risky than a person that is late on loans, always uses the over draught protection services. To the person without a good credit rating, it may seem unfair, but the chances to redeem credit and trustworthiness are available to all of us.