Milton Friedman once said “The Great Depression, like most other periods of severe
unemployment, was produced by government mismanagement rather than by any inherent
instability of the private economy”. Meaning that when it comes to having a successful, well
fit and stabilized economy, output, the banking system, employment plays an important part
in keeping up the economy, but the most crucial and should be most focused on, is
government decisions. Decisions made by the government can impact all other aspects that
determine whether or not the economy will be stable. The GDP, unemployment rate and
inflation reveals and informs economist a great deal about a Country’s economic health.
The Gross Domestic Product or GDP, represents …show more content…
Along with GDP. unemployment and
inflation, there are other approaches that can be used to help build or slow down the economy
if needed.
Over the years, different economists have been going back and forth about which
policy or approach may be best for the economy. There are several viewpoints about how to
best stimulate our economy. The first is the classical approach. Classical economists
(theorists) focus on the laissez-faire approach, meaning they want no outside action, no
interference taken by the government; classical economists believe in letting things take its
own course and let the economy stabilize itself. A self adjusting economy is not the correct
way to build a economy. Say’s Law states that supply creates it own demand. In a perfect
world, this theory would be a great approach, but the world is not perfect. Businesses would
take full advantage of no government intervention. All major companies would try to go into
a monopolistic status, getting rid of all other competitors, in an attempt to take and control
that line of market. Banking systems, stocks will be at a huge deficit. Unemployment …show more content…
The third policy is the Monetary policy. Monetary policy refers to what the Federal
Reserve Bank, the United Sates central bank, does to influence the amount of money in the
U.S. economy. It controls the economy by managing amount of money available. By
modifying money supply and/or interest rates, aggregate demand can shift. The Federal
Reserve Bank is the central bank of US, which sets the overall policies and oversees all banks.
The Federal Reserve Bank has three different tools it uses to either build or slow down the
economy. The first tool is reserve requirements. This is how much money all banks need to
keep on hand. In case that bank takes a hit, people that may have a savings account with that
specific bank, will not lose their money. In case the economy is in a rapid growth, the Federal
Reserve make banks have a decrease in the amount of money they loans in order to slow
down the economy and to stimulate the economy, the reserve requirement is decreased which
allows banks to keep less on-hand.
The second tool is the discount rate. Raising the discount rate would slow down
unemployment, was produced by government mismanagement rather than by any inherent
instability of the private economy”. Meaning that when it comes to having a successful, well
fit and stabilized economy, output, the banking system, employment plays an important part
in keeping up the economy, but the most crucial and should be most focused on, is
government decisions. Decisions made by the government can impact all other aspects that
determine whether or not the economy will be stable. The GDP, unemployment rate and
inflation reveals and informs economist a great deal about a Country’s economic health.
The Gross Domestic Product or GDP, represents …show more content…
Along with GDP. unemployment and
inflation, there are other approaches that can be used to help build or slow down the economy
if needed.
Over the years, different economists have been going back and forth about which
policy or approach may be best for the economy. There are several viewpoints about how to
best stimulate our economy. The first is the classical approach. Classical economists
(theorists) focus on the laissez-faire approach, meaning they want no outside action, no
interference taken by the government; classical economists believe in letting things take its
own course and let the economy stabilize itself. A self adjusting economy is not the correct
way to build a economy. Say’s Law states that supply creates it own demand. In a perfect
world, this theory would be a great approach, but the world is not perfect. Businesses would
take full advantage of no government intervention. All major companies would try to go into
a monopolistic status, getting rid of all other competitors, in an attempt to take and control
that line of market. Banking systems, stocks will be at a huge deficit. Unemployment …show more content…
The third policy is the Monetary policy. Monetary policy refers to what the Federal
Reserve Bank, the United Sates central bank, does to influence the amount of money in the
U.S. economy. It controls the economy by managing amount of money available. By
modifying money supply and/or interest rates, aggregate demand can shift. The Federal
Reserve Bank is the central bank of US, which sets the overall policies and oversees all banks.
The Federal Reserve Bank has three different tools it uses to either build or slow down the
economy. The first tool is reserve requirements. This is how much money all banks need to
keep on hand. In case that bank takes a hit, people that may have a savings account with that
specific bank, will not lose their money. In case the economy is in a rapid growth, the Federal
Reserve make banks have a decrease in the amount of money they loans in order to slow
down the economy and to stimulate the economy, the reserve requirement is decreased which
allows banks to keep less on-hand.
The second tool is the discount rate. Raising the discount rate would slow down