In this chapter, students will be able to understand: The Federal Reserve has four conventional monetary policy tools, the European Central Bank's primary objective is price stability, monetary policymakers use several tools to meet their objectives, the Taylor rule is a simple equation that describes movements in the federal funds rate,. | Chapter 18 Federal, State, and Local Governments Operating In The Financial Markets Learning Objectives To examine the many important roles played by the government’s Treasury Department. To identify how the government raises new funds and how it spends the funds raised. To understand how the activities of the Treasury Department impact the money and capital markets and the economy. Learning Objectives To explore the various ways state, county, and city governments raise the funds needed to supply government services to the public. To be able to describe the different instruments that state and local governments use to attract money and why these instruments are attractive to millions of investors. Introduction In the United States (and many other nations), governments exist at several levels – federal or national, state, and local. The great majority of these governmental units are legally entitled to enter the money and capital markets at any time and borrow money. These . | Chapter 18 Federal, State, and Local Governments Operating In The Financial Markets Learning Objectives To examine the many important roles played by the government’s Treasury Department. To identify how the government raises new funds and how it spends the funds raised. To understand how the activities of the Treasury Department impact the money and capital markets and the economy. Learning Objectives To explore the various ways state, county, and city governments raise the funds needed to supply government services to the public. To be able to describe the different instruments that state and local governments use to attract money and why these instruments are attractive to millions of investors. Introduction In the United States (and many other nations), governments exist at several levels – federal or national, state, and local. The great majority of these governmental units are legally entitled to enter the money and capital markets at any time and borrow money. These fund-raising activities impact the economy and affect market interest rates, asset prices, and overall credit conditions in the financial marketplace. Federal Government Activity In the Money and Capital Markets The . Treasury Department exerts a potent impact on the financial system through its fiscal policy – the taxing and spending programs of the federal government designed to promote various economic goals, and debt management policy – the refunding or refinancing of the federal government’s debt in a way that contributes to its economic goals and minimizes the debt burden. The Fiscal Policy Activities of The . Treasury Congress dictates the amount of funds the federal government will spend each year on programs like welfare and national defense, and also determines the sources of tax revenue and tax rates. When tax revenues are not sufficient to cover expenditures, a budget deficit occurs. A budget surplus occurs when government revenues exceed expenditures. The Fiscal Policy
