U.S. Economic Assessment
economy has been relatively stable for the past few years, with unemployment being slowly reduced, GDP growth slow but stable, low interest rates for many years and inflation being largely held in check. Short run fluctuations have been just that -- short run events that do not seem to have impacted long-run economic policy nor the long-run direction of the U.S. economy.
In basic macroeconomic theory, short run events should not have much significant impact on long-run economic outcomes. In the short run, if there is an increase in aggregate demand, that should reduce aggregate supply. The supply side will then increase production to meet the higher demand level. If the demand spike was short-lived, this will result in an overproduction, and production will then need to be reduced again to work down this oversupply. If aggregate demand has ended up back at its starting point, so too will aggregate supply. The disruption to the trend will be minor, and the trend restored in a matter of a few months, back to the normal equilibrium level (Investopedia, 2016).
If the short-run shift in aggregate demand holds over the long run, then production increase will also need to hold, increasing aggregate supply to meet AD at the new equilibrium point. This will reflect in macroeconomic figures as sustained growth.
The former type of fluctuation, where the change in AD is short-run, should not have long-run lasting impacts on the overall health of the economy. Inflation rates and unemployment are stickier than AD and even AS, so the response to a minor short-run change in AD should probably not amount to much in terms of long-run outcomes. Only when a change is either long-run in nature,...
Monetary Policy In the United States, the Federal Reserve system is charged with implementing monetary policy (Investopedia, 2013). Monetary policy is essentially any the output of any central bank that seeks to manage an economy by means of manipulating the supply of money in the economy (Investopedia, 2013). The Federal Reserve (2013) defines monetary policy as what it does to "influence the amount of money and credit in the U.S. economy."
Monetary Policy Every economic activity in the United States is related to the policies that are decided by the monetary policies of the nation that are formulated. This involves all activities like purchase of houses, starting up of new business enterprises, and expansion of businesses, investments in new plants or machinery. It also affects our investment decisions like putting our investments in banks, bonds, or the stock market. It is also
" (ECB, 2007) Operational efficiency is held to be the most important of all the principles of operation for the ECB and can be defined as "the capacity of the operational framework to enable monetary policy decision to feed through as precisely and as fast as possible to short-term money market rates. These in turn, through the monetary policy transmission mechanism, affect the price level." (ECB, 2007) Equal treatment and harmonization
While this represents a significant portion of the government's operating income, higher inflation would generate even more seigniorage by requiring larger volumes (or simply higher denominations) of currency in circulation. If prevailing annualized inflation rises above 4.6% but remains below 9.0%, real seigniorage could climb to $130 billion, or about 6% of all federal receipts in a year like 2009 (U.S. Financial Management Budget). In itself, cash carries an interest rate
Monetary Policy Any change in the central back policy or the bank reserves, which is made to influence the interest rates and thus the investment, employment or production, is called the monetary policy. If the monetary authority wants to increase production, they need to increase the bank reserves. The bank then expands the money supply, which in turn reduces the interest rates. Monetary policy is one of the tools that a
Monetary Policy Discuss some of the major determinants of the demand for money by sector and in total. Discuss some differences in the demand for money which might exist for countries other than the U.S. An effective formulation of the Monetary Policy depends on the determining factors of the demand for money. Money Demand acts as a channel on transmission mechanism for monetary policy. Therefore the consistency of the money demand function
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