Description
Competency 3 - The Global Economy
Competency 2 - The Federal Reserve, Government, and the Economy
Part 2 Competency 2 - Reflection
Assignment Content
Reflection- This reflection activity is comprised of two sections collectively totaling a minimum of 500 words. Complete your reflections by responding to all prompts.
Federal Reserve
Analyze how changes in the Federal Reserve’s monetary policy affect at least 2 of the 4 components of GDP (e.g., consumption, investment, government spending, net exports). Justify your answer to the following question: Have the Federal Reserve’s countercyclical monetary policies been effective in moderating business cycle swings?
Government Intervention
Government interventions into markets can sometimes succeed, but sometimes they make the situation worse. Explore 2 examples of government intervention that did not work. Explain why the intervention made things worse and what could have been done differently to improve the situation. Support your analysis by including:
- What the situation was
- What the intervention sought to solve
- What happened
- What might have been done differently
Competency 3 - The Global Economy
Part 2 Competency 3 - Reflection
Reflection- This reflection activity is comprised of two sections collectively totaling a minimum of 500 words. Complete your reflections by responding to all prompts.
Exchange Across International Borders
The success of an economy in effectively employing the four factors of production determines how well that economy performs relative to its potential and relative to other economies.
Address the following:
- Evaluate non-monetary benefits that open trade has contributed to the world since the end of World War II.
- Provide at least 2 examples of the above benefits and explain why you believe each is important.
- Analyze how changes to U.S. trade and tariff policies affected U.S. trade with other nations.
Support your responses with recent (less than 2 years old) credible news sources.
The Global Role of the US Economy
Consider that some politicians, labor unions, and special interest groups argue that U.S. trade deficits are harmful to the economy, and nations that run large trade surpluses with the United States are benefiting from unfair trade practices and agreements. These parties support increasing tariffs on imports and eliminating or rewriting trade agreements.
Analyze 2 credible economists’ opinions on the effects of 2 of the following factors with respect to the total U.S. trade balance. Find 1 economist who is less concerned about trade deficits, who thinks they are less important, or that they mean something else is good (U.S. consumers have more disposable income for example). Then, find another economist who is more concerned (he or she may see a trade deficit as having adverse employment effects, for example). Weigh in their different perspectives, and state whether you agree or disagree with their assertions, providing the logic behind your thinking. The factors to analyze include:
- Tariffs
- Changing trade agreements
- Manipulating exchange rates
Explanation & Answer
View attached explanation and answer. Let me know if you have any questions.
Running Head: REFLECTION ON COMPETENCE 2 AND 3
Reflection of Competence 2 and 3
Student’s Name
Institutional Affiliation
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REFLECTION ON COMPETENCE 2 AND 3
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Reflection of Competence 2
Analysis of Federal Reserve
The Federal Reserve's monetary policy has a contractionary effect on the economy
because it reduces economic consumption by reducing the money supply. As the money supply
chain shrinks, consumer spending, a component of consumption and the Gross Domestic
Product, will also (GDP). The usage of goods and services by a specific household can be
described as consumption within the GDP. By increasing the money supply chain across the
economy, the Federal Reserve's monetary policy can expand. Increasing the amount of money in
circulation leads to an increase in GDP (Svensson, 2020). To put it another way, consumer
spending is rising because the money supply is increasing. The demand curve can be shifted in
either direction by an expansionary or contractionary effect.
The second component of GDP to be discussed is an investment influenced by Federal
Reserve monetary policy. It is important to remember that the cost and availability of credit both
influence inflation. The monetary policy of the Federal Reserve is based on federal financing,
and this affects interest rates. The borrowing power of a given party can be dictated by interest
rates, which affect individuals' and corporations' abilities (Svensson, 2020). As interest rates fall,
investors will be more willing to invest more money overall. If interest rates rise, consumers and
businesses will be unable to invest due to reduced borrowing power. As long as there is a market
for the product or service, demand will increase, which will impact inflation rates and, in turn,
investment decisions. For one thing, inflation impacts investments since the going rate may be
out of date, and the ability to invest is limited because of the current product or service going
rates (Svensson, 2020).
REFLECTION ON COMPETENCE 2 AND 3
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For the Federal Reserve, monetary policy countercyclical to the business cycle has
worked well. As the Federal Reserve sees an increase in activity, outputs will be boosted,
increasing the money supply by putting people to work. This may harm interest rates and other
aspects of the economy and the property market (Svensson, 2020). A rise in inflation can have
the opposite effect by slowing money creation. As a result, interest rates would rise, which would
slow inflation.
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