Monetary economics

In today’s society, many households and business are affected by monetary and fiscal policy in regard to real income and the increase in spending. Monetary policy affects the way society spends when the Federal Reserve regulates the amount of money in circulation. The Federal Reserve controls the money supply by the interest rates offered to banks. Therefore, more money is borrowed by the banks at lower interest rates which means more money will be in circulation. In contrast, higher interest rates yield less money circulation in the economy. In addition, The Federal Reserve Bank of San Francisco defines monetary policy as an instance where the Federal Reserve controls the volume of money and their price-interest rates (Econ, 2002). On…

The government takes action to influence the economy. Economic policy refers to the actions that governments take in the economic field, economic policy hopes to accomplish a constant flow of supply and demand as well as incoming money. The economy has many working factors such as; supply-side economics, demand-side economics, and monetary policy. Supply-Side economics emphasizes the thought of strong economy policies that remove impediments to supply. Supply-Side economics originated from…

There is an argument between which theory works best, side-supply or demand-side. They are both important because you need both the supplier and consumer. When you comparing and contrasting the two arguments it is obvious that they are both needed to make our economy better. Supply-side economics is also known as Reaganomics or the "trickle-down" policy. Side-supply has three parts: tax policy, regulatory policy and monetary policy. Tax cuts for investors and entrepreneurs gives a greater…

In order to explain the link between inflation and the money supply, economists use what's called the quantity theory of money. It centers on the Quantity Equation. This basically says that economic output (gross domestic product) is equal to how big the money supply is, this is multiplied by the velocity of money, which is how many times the same dollar gets spend throughout the year. Real GDP is equal to how big the money supply is I multiplied by the velocity of money. In macroeconomics it…

Economic integration consists of several stages. Stages in increasing integration includes independent economy, preferential trade area, free trade area, customs union, common market, monetary union, fiscal union and political union. One of the main reason why nations pursue in economic integration is that economic integration will effect in an increase of trade between members of the state. This will lead to an increase in productivity of the nations. United Kingdom (UK), also known as…

(Friedman 1994). This was very much like the 1896 election and the Democratic arguments regarding the economy then. Congress passed a silver purchasing act that required the U.S. Treasury to purchase silver, until the market price was a $1.29 an ounce or silver equaled 1/3 of the monetary stock (Friedman 1994). One major outcome of this act was to provide a subsidy to silver producers at the expense of the taxpayers. The silver purchases did not do anything to aid the recovery of the American…

stock affect output, but this has been derived from exactly the same equation as the model which purported to show the systematic monetary policy can affect output. With the additional assumption, that the public make rational expectations about monetary policy, the two models can be said to be observationally equivalent. The general implication is that any estimated reduced-form equation which an econometrician discovers in the data is compatible with many different structural models with…

Monetary and Fiscal Policy How Does the government keep our country from falling into economic depressions like the 1940’s? In the early 1930’s a man named John Maynard Keynes started an evolution in economic thinking. He challenged the ideas of the free market and argued that aggregate demand determined the overall GDP. He also argued that inadequate aggregate demand could lead to prolonged periods of high unemployment. Keynes proposed the use of fiscal and monetary policies to diminish…

Monetary policy describes the way that central banks work to reach desired macroeconomic policy goals including overall price stability, total employment, and consistent economic growth. The Federal Reserve of the United States has certain macroeconomic goals set by Congress such as reaching full employment and ultimate price stability (Economic Outlook, 40-41). In combination with these particular objectives, the United States Congress decided that the functional behavior of monetary policy…

The Federal Open Market Committee (FOMC) has the responsibility of determining the direction of the monetary policy through open market operations. FOMC is a branch of the Federal Reserve (The Fed) Board which consists of a board of governors composing of seven members and five Reserve Bank presidents. The President of each bank serves a one year term while the President of the Federal Reserve Bank of New York serves continuously. To ensure fair representation across all locations President…