The relationship between price and Money Supply Research Paper

The relationship between price and Money Supply - Research report ExampleThis is done by issuing sufficient monetary instruments when required. The Central banks too help the giving medication in designing the currency of the country, which includes all the fantastic features. 2. It is involved in regulating and co-coordinating with the authorities and the stated economic policies of the country. 3. The interest rates ar also controlled by the central banks to maintain price stability within the country. It also has to keep a track of the inflation in the market. The Central Banks of all the countries have an effective plan for managing the public debts. They do this done the sales and purchase of government activity papers such as bonds and securities. 4. The Central Bank is also known as a bankers bank. This means that the commercial banks of the countries are also regulated by the Central banks of the respective country. The Central bank not only regulates them but also provide adequate financial helper in time of need. 5. The central bank needs to ensure the proper functioning of the financial systems within the county. They regulate the banking system within the country and are answerable to the world market (Downes & Vaez-Radeh, 1991). Balance Sheet Analysis The Balance Sheet of Central Banks has the list of all the liabilities and the assets that the Central Bank possesses. It is important to get a line the balance sail of the Central banks in order to understand how they implement the monetary policy because the balance sheet reflects the sales, purchase records of the Central Bank and also states the holding. The Central Bank is the in charge for issuing the countrys currency and it also posses the power to eliminate the power of the currency. In short, we can say that the balance sheet shows the true picture of the actions of the Central Bank. The balance sheet of a Central Bank focuses on three main components bankers to commercial bank s, Issuing the nations currency and banker to the government of the country (Jadhav, 2006, p. 246). The Balance Sheet needs to be analyzed from two viewpoints such as as an issuer of currency and duty to maintain the price stability and the growth of the economy through attaining the monetary policies of the countries economy. It is important to know certain important perspectives to understand the balance sheets of the Central banks. Firstly, the central banks are fully government owned. There are very few exceptions, but in that case there are certain restrictions on the share-holding patterns. Secondly, Central banks are the only banker for the government of ever nation. Finally, the Central bank also has to take care of the public debt. It has to always see that the net foreign asset is higher compared to the currency, so as to see that the domestic demand of foreign currency is duly met The monetary base The two components of specie supply are monetary base and money multiplie r. Monetary base includes the reserves and the outstanding currency of the economy. It comes in the asset side, in the balance sheet, of the central bank. It links the central banks to the other measures of the money supply. So we can