China and Usa: a Comparison of Their Monetary Policies Essay

Words: 3222
Pages: 13

University of International Business and Economics

China and USA:
A comparison of their Monetary Policies.

Mid-term Project
School of International Trade and Economics

BY
Rebecca Bogiri
Professor: LIN GUIJIN

Beijing, China
2 December 2009

China and USA:
A comparison of their Monetary Policies.

By: Rebecca Bogiri

December 2009

Abstract

The monetary policies of USA and China is analyzed here from the perspective of their implementing bodies, their choice of instruments, and their means of setting their interest rates. The analysis reveals that there are immense differences between the two countries resulting from the nature and degree of influence from their respective domestic political systems. The paper
…show more content…
In the long run, the amount of goods and services the economy produces (output) and the number of jobs it generates (employment) both depend on factors other than monetary policy. These factors include technology and people's preferences for saving, risk, and work effort. So, maximum sustainable output and employment mean the levels consistent with these factors in the long run.
But the economy goes through business cycles in which output and employment are above or below their long-run levels. Even though monetary policy can't affect either output or employment in the long run, it can affect them in the short run. For example, when demand weakens and there's a recession, the Fed can stimulate the economy temporarily and help push it back toward its long-run level of output by lowering interest rates. That's why stabilizing the economy, or smoothing out the peaks and valleys in output and employment around their long-run growth paths—is a key short-run objective for the Fed and many other central banks.
USA Federal Reserve – Balance Sheet

|ASSETS |LIABILITIES |
|Gold and Foreign Exchange |Currency |
| |Held by public |