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Should The Federal Reserve's Fiscal Policy Or Macroeconomies?

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Economics is a complex topic that most people are not educated about. Economics as a whole determines the factors in which production, distribution, and consumption of goods and services work (“Economics,” n.d.). There are many different policies on how government can approach these factors. Economics are divided into two studies where Microeconomies focus on smaller groups and individuals, and Macroeconomies focus on a nation as a whole. The study of macroeconomies can be approached through the two policies called Monetary and Fiscal Policies. Both policies aim for the same result of economic growth, but goes through different means in which to achieve it. Both policies impact American lives in significant ways, but neither approach them the …show more content…

economy receives. Regulating the amount of money the economy receives affects interest rates and the behavior of the economy. The objective of Monetary Policy is to augment employment, balance prices and interest rates, and most of all, ensure economic growth. The Federal Reserve focuses on open markets to regulate the amount of money banks have. This involves the purchasing and retailing of government securities. Establishing an open market takes away the Federal Reserve’s power to pick and choose who it does business with and gives it to primary dealers. The Federal Reserve purchases those securities to increase reserves by making a deposit to the account maintained by the primary dealer’s bank (“Monetary Policy Basics,” n.d.). In contrast, to decrease reserves, the Federal retails and collects reserves from those banks (“Monetary Policy Basics,” n.d.). These exchanges regulate the amount of money banks have and their rates making money more available for the economy. With federal money controlled and regulated short-term interest rates can be adjusted to benefit the economy. These short-term interest rates can be converted into long-term interest rates that locks itself with the ever changing economy. All these changes, influences the amount of spending that people and businesses can have. Monetary Policy operates on the setting of interest rates and regulating the supply of money in the U.S.

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