Money and Banking Assignment Essay Example | Topics and Well Written Essays - 1000 words

Money and Banking Assignment - Essay ExampleThis is due to the fact that banks are involved in dubious investments without fear or c erstwhilern about the repercussions nations may face in the advent of losses.Risky investments are aggravated by the fact that banks will be bailed out in case of losses by rudimentary banks. This can facilitate organized losses and economic failures by rogue individuals with the aim of channelling solely the banks financial assets into their possession and then request for central banks intervention. This burden, through the central banks is channelled back to taxpayers. The reverse is excessively true. If financial institutions were unable to solicit funds from central banks, then chances of them indulging in risky investments would be very minimal. (Hughkitt13 2012)III. Compare the use of open-market-operations, central bank lending facilities (rediscounting), and changes in reserve requirements to control the funds supply on the following crite ria flexibility, reversibility, effectiveness, and speed of implementation.The best monetary policy should implement the following criteria to be considered effective flexibility, reversibility, effectiveness and higher speed of implementation. On the issue of flexibility, the best method to use would be to change the reserve requirements. Depending on prevailing market conditions, reserve requirements can be easily modify to either reduce the money supply or increase it. The process is done on a daily basis, making it the most effective and as well the fastest method to implement.Central bank rediscounting is a faster method to implement than open-market-operations since they can be obtained easily under short notice. They are also more flexible owing to the fact that they require fewer channels to get them. OMOs are more rigid and are only implemented once financial dignitaries meet and agree on the way forward. However, when we consider