Does Monetary Policy Affect the Economy

Does monetary constitution affect the economy? Monetary policy is controlled by plyeral Reserve System. Mainly, the monetary policy provide stimulate subscribe by increasing or step-down a short term interest pace. For most part, the demand for goods and services is not related to the grocery interest array which knows as nominal interest rate, only it is related to touchable interest rate, which come from nominal rate minus the expect rate of inflation. The tar push backing for monetary policy is to stimulate the economy as reflected in such factors as inflation, economic output, employment. The monetary policy leave affect economys demand by expected that tradees, and individuals bequeath spend more for goods and services. On the former(a) hand, a lot of muckle say that monetary policy causes the problem for the economy because when the interest rate is low, individuals, and businesses want to take on more money from the bank. But a lot of people will use the benefit of low interest rate to estimate the profit of some investment such as buying house, land. If they are doing like this more and more, this situation will cause a problem in the future. Because the price for the houses will go up and up until we have an economic bubble.

overly we know that the Fed applies the monetary policy when the economy needs to have high economic growth and low inflation, but it is not easy to do some kinds of this thing. For instance, suppose the Fed is intending to reduce inflation by using cleared market sales to reduce money supply growth, but the open market sales will increase interest rates. The conduce shows that higher(prenominal) interest rates normally reduce business and consumer spending in the short run. So, the monetary policy that mean to achieve one monetary policy goal such as lower inflation will affect some other monetary goal such as economic growth. In fact, a monetary policy that continually attempts to keep short real rates low will cause higher inflation and higher nominal interest rates,... If you want to get a full essay, order it on our website: Orderessay

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