1. The Federal Reserve two primary goals, are:
- Controlling Inflation;
- Controlling Unemployment;
The current Dual mandate of the Federal Reserve first made its way into the Federal Reserve Act in November 1977. Federal Reserve tries to achieve: 1) maximum employment; 2) stable prices; and 3) moderate long-term interest rates. The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances. It has been determined that inflation …show more content…
It does not account for domestic or voluntary work, even though these activities have a considerable positive impact on social welfare, as they complement the market economy and thus improve the standard of living.
- it does not include the “shadow” or informal economy, which has a big impact in many countries. Activities in the shadow economy are not included in GDP statistics, even they may have a big influence on the welfare of some parts of the society.
- it does not describe wealth distribution. Wealth distribution is very important in describing the wealth of the society. Not all the people can always benefit from an increased economic output.
- it does not describe what is being produced. It measures the value of all finished goods and services within an economy, it also includes products that may have negative effects on social welfare.
- it ignores the effect of increased exploitation of renewable and non-renewable resources. Due to this exploitation, more negative externalities arise such as pollution, global warming and social welfare will decrease as a result.
- Controlling Inflation;
- Controlling Unemployment;
The current Dual mandate of the Federal Reserve first made its way into the Federal Reserve Act in November 1977. Federal Reserve tries to achieve: 1) maximum employment; 2) stable prices; and 3) moderate long-term interest rates. The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. Communicating this inflation goal clearly to the public helps keep longer-term inflation expectations firmly anchored, thereby fostering price stability and moderate long-term interest rates and enhancing the Committee's ability to promote maximum employment in the face of significant economic disturbances. It has been determined that inflation …show more content…
It does not account for domestic or voluntary work, even though these activities have a considerable positive impact on social welfare, as they complement the market economy and thus improve the standard of living.
- it does not include the “shadow” or informal economy, which has a big impact in many countries. Activities in the shadow economy are not included in GDP statistics, even they may have a big influence on the welfare of some parts of the society.
- it does not describe wealth distribution. Wealth distribution is very important in describing the wealth of the society. Not all the people can always benefit from an increased economic output.
- it does not describe what is being produced. It measures the value of all finished goods and services within an economy, it also includes products that may have negative effects on social welfare.
- it ignores the effect of increased exploitation of renewable and non-renewable resources. Due to this exploitation, more negative externalities arise such as pollution, global warming and social welfare will decrease as a result.