"Money and Monetary Policy and Inflation"

Economics
Tutor: None Selected Time limit: 1 Day

examine two (2) methods that the Federal Reserve can implement to support a stronger economic recovery. Provide support for each method in your response. 

Mar 8th, 2015

The prime tool Federal Reserve has to stabilize economy is the control on monetary policy. Current economic conditions of the US are not favorable and growing which must be regulated and controlled by devising and implementing effective economic policies. The Federal Reserve has lowered the interest rates by initializing Quantitative Easing (QE) policy according to which the money supply has been increased substantially. Now, the Fed must critically control this availability of circulating money in the financial market. The increase in money supply reduces the interest rates and people tend to take more loans from banks to invest in the market. As the investment increases, the demand for labor increases and employment rate moves to betterment. If the employment rate is not controlled up to a certain extent, the inflation rates tend to rise up due to high labor demand for wages. The Federal Reserve must keep increasing the money supply but it should also evaluate a constructive plan to stop the money supply at a particular time and the strategy to achieving equilibrium at a point where employment rates remain highest without affecting the inflation.

Ref:

John C. Williams (2012). FRBSF. The Federal Reserve and the Economic Recovery. [WEB] January 17th 2012. Retrieved from:
http://www.frbsf.org/economic-research/publications/economic-letter/2012/january/federal-reserve-economic-recovery/


Mar 8th, 2015

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