Demand-Side Policies and the Great Recession of 2008
A recession can be defined as an overall downward spiral in a nation's economy. In particular, the outcome of recession is high inflation, high level of unemployment slowing down its gross domestic product (GDP) (Study, 2016). In this period there is an economic weakening and is usually accompanied and further complicated by decrease in the stock market, an upturn in unemployment and also a deterioration in the housing market. Some of the factors that cause recessions include high interest rates, increased inflation, decreased consumer confidence, and decreased real wages (Mankiw, 2014).
Fiscal Policies
In delineation, fiscal policies refer to the use of government expenditure and taxation to regulate the aggregate level of economic activity. It can be argued that by increasing investment or government expenditure, for instance, an initial stimulus to expenditure, through the multiplier-accelerator interaction results in an even greater increase in national income (Mankiw, 2014). When the government makes the decision with regard to the goods and services it buys, the transfer payments it disseminates or the taxes it collects, it takes part in the fiscal policy. Fiscal policy is deemed to be contractionary when the
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
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 is crucial to the economy and impacts all types of economic and financial decisions individuals make. For example, depending on the state of the economy, individuals may decide whether to obtain a loan to purchase a new car or house or to start their own company, whether to expand a business by investing in a new plant or equipment, and whether to put savings in a bank, in
Monetary Policy and the Federal Reserve The Federal Reserve ("the Fed") is responsible for formulating and implementing the nation's monetary policy. Monetary policy is government actions to increase or decrease the money supply and change banking requirements and interest rates in order to influence spending by altering banker's willingness to make loans. An expansionary monetary policy increases the money supply in an effort to cut the cost of borrowing, which encourages
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