The Federal Reserve: Unemployment And Inflation

“The Federal Reserve plays a major role in controlling unemployment and inflation. They rely on economists to give them data in order to control these areas. The economists use data to determine if the economy is growing or shrinking in size, the measure of total output calls the real gross domestic product is used. The real gross domestic product (Real GDP) is the market value of all final goods and services produced within a country in a giving period. Every legal goods and services paid for that can be tracked makes up the Real GDP. The market value is the benefits of all final goods and services produced even if the total output falls. If the Real GDP falls significant for a certain period of time the economy would be in a recession. This …show more content…
The capability to produce goods and services even if prices fall, the same level of supply and services will be provided. When the Aggregate Supply prices go up, the economy will go up. If it goes down, the economy work force will go down. Aggregate Demand is the total quantity of goods and services demanded from four sources; households (personal consumption), firms (investment), government agencies (government purchases) and foreign markets (net exports) equal the Real GDP.” It slopes downward because of the change in the price level that alter consumption known as the wealth effect, lower interest rates on investment and lower the price on trade increases exports. The aggregate demand curve shifts when the quantity of the real GDP at each price level changes. When the Aggregate Demand prices go down the Real GDP …show more content…
They control the outcome of interest rates, recessions, inflations and expansions. The policy in place is the Monetary Policy. The Federal Reserve Dual Mandate is the two objectives that Congress established for monetary policy in the Federal Reserve Act: maximizing employment and stabilizing prices.” The Fed pursues a contractionary policy they use a Monetary Policy tool to raise the federal funds to keep inflation under control. When the Fed pursues an Expansionary policy they use a Monetary policy to fight recessions by lowering the federal funds rate. In order to achieve its dual mandate, the fed buy and sell government securities on the open market (Open Market Operations), charges approve the financial institution to borrow funds on a short term basis (The Discount Rate), and require the depository financial institution to set aside a percentage of their deposits to be held on hand as cash or account balance at a Reserve Bank (Reserve Requirement). They also pay depository Institution interest on reserve balances (Interest