This is primarily a tool at the disposal of the central bank of a country which uses different tools to manage the macro economic variables of a country to keep the economy stable or to stabilize it in situations of fluctuations. Monetary policy can be expansionary or contractionary depending on whether the money supply is being increased or decreased in the system so as to affect economic growth, inflation, exchange rates with other currencies and
During this decade, the Fed pursued a discretionary stop-go monetary policy using a trade-off known as the Phillips Curve, which alternated efforts to decrease high inflation and high unemployment. To target high unemployment, the Fed enacted an expansionary monetary policy, or a go period, by lowering the short-term nominal interest rate called the federal funds rate, to loosen the money supply. The federal funds rate is the interest rate that a bank charges another bank when loaning out their reserve balances in order for the other bank to maintain reserve requirements. The Fed chose to target the federal funds rate because it is very influential in the economy, affecting monetary and financial conditions. After inflation mounted during the go period, the Fed would enact a contractionary monetary policy, or a stop period, by raising interest rates to tighten the money
All through his book Gordon explains how the debt has influenced and shaped the history of America economy. Hamilton wanted to reshape the American economy, thus he proposed the virtues of the national debt claiming that when it is limited it may be a national blessing. While providing the audience with a history of the American debt, Gordon aims at proving Hamilton 's beliefs. Indeed, the author wants to show that if the debt is used wisely, it may turn out to be a useful political and economic instrument. To support the assertion that the budget deficit is not necessarily evil, he includes different events of the American history.
During the next year, Yellen has to decide how quickly to wind down the asset purchases that began five years ago; when to begin notching interest rates higher to forestall inflation; and how aggressively to supervise the big financial institutions so as to prevent another wave of expensive and unpopular government bailouts if the markets go sour. And she has to maintain her very public commitment to improve the economy as ordinary people, rather than market players, experience it.”
What were the sources of the American economic recovery of the 1980s and 1990s? Who benefited from it and who did not, and why was that the case? The American economy during the time period of 1980-1990’s was in a state of regrowth after the federal government’s economic policies of the 1970’s was revised. President Reagan felt the federal government had become too intrusive in state administration with regards to economic policies (American History, 2012). Reagan’s economic plan was largely based on a “supply-side economic theory” in which large tax cuts would encourage people to work longer hours and promote investments.
It is a system that was designed by bankers for the benefit of bankers, and it is creating poverty for the American people. The Federal Reserve uses the U.S. economy by setting national interest rates. It keeps rates high or low, the Fed has the power to make the economy great or completely destroy it. . They have the power to inflate massive bubbles and to pop them.
In order to allow a stable expansion of the economy, the Fed primarily manages the growth of bank reserves and money supply through three main tools. To implement the task of controlling the money supply, the Fed may implement a change in reserve requirements, a change in discount rate or make open-market operations. (Cloutier, n.d.) The cash reserve ratio is the percentage of reserves a commercial bank is required to hold against deposits. If regulators decide to lower the cash reserve ratio, the commercial banks will be able to lend more thus increasing the supply of money or the amount of money in the economy. (Kaplan, 2002) An increase in the money supply would then lead to an increase in the amount of money that people and firms will be
Firstly, let me start by explaining the meaning of macroeconomic and microeconomic. Macroeconomics is the division of economics which help us to study the behavior and performance of an economy; it also helps us to focus on the aggregate changes in the economy for example Gross Domestic Product (GDP), inflation and unemployment. Macroeconomics focused on the determinants of total national output, it studies the national income not only the household or individual income but the overall price level; it also analyze the demand of total employment in the economy not only the individual. Secondly Microeconomics, basically microeconomics is the opposite of macroeconomic. Microeconomics is the study of individuals, households and firms behaviour
How does the federal government regulate the economy for the benefit of the public? Discuss specific policies and programs, including their effects. The federal government has many programs and abilities to regulate the United States economy. On of which is the fiscal policy which allows government to raise and spend money. This gives government the ability to keep a steady balance in the economy.