Principles of Economics.Monetary Policy and the Federal Reserve Essay

Investment and consumption lessen during the 2007 and 2009 receding. Government exp destroyiture can affix Aggregate remove beca function it increases liquidity in the market. The government may operate below full employ when job seekers argon more than available job hence end up accepting low wages. The multiplier can have a negative effect when people lose jobs as a dissolving agent of government cut spending. This causes initial lower in national income. The human relationship amidst marginal propensities and multiplier is that an increase in MPC leads to an increase in multiplier. Similarly, increase in MPS causes a slump in the multiplier (Farmer, 2008).2. Fiscal constitution 9/11 attack led to decrease in aggregate demand, in United States. An example of a sphere that was hit hard is entertainment and travel sectors. It also led to decrease in personal consumption. The attack caused an increase in offset hurt levels. This is because there is an inverse relatio nship between Aggregate demand and equilibrium price levels.An Expansionary fiscal insurance and Contractionary fiscal policy is used to increase aggregate demand. Expansionary fiscal policy is a policy used during the recession to increase AD by increasing government spending or decreasing taxes.Contractionary fiscal policy is used during inflation in disposition to decrease AD by decreasing government spending or increasing taxes (Farmer, 2008). After September 11s attack, the government increase expenditure in different sectors such as national defense.3. coin and savings banking Factors that led to the owe default crisis is much borrowings and flawed fiscal manikin majorly based on an assumption that prices of homes only go up, greed and fraud.mortgage defaults affected kick ining banks in that their loans were not repaid leading to huge losses. In many cases, they got real estate that was valued far below what mortgage was when borrowers had a note. Default of bonds i ncome backed by mortgage loans was interrupted banks were left wing with unwanted real estate (Friedman, 2010).Securitization is pooling different types of contractual debt. TARP is a program formed by the government of US to buy assets and righteousness from institutions that offer financial services in order to strengthen the financial sector. TARP opened a window of opportunity for banks to pay their have debt and acquire other businesses instead of lend money to private sectors. The national Reserve injected funds into the credit markets in order to help them lend again. It also reduced the target federal funds rate.Major comestible in the Wall Street Reform and Consumer Protection Act accept Office of Insurance which creates federal officialeral Insurance Office that monitors aspects of the insurance industriousness and Consumer Protections that creates Consumer Financial Protection Agency which protects Americans from unfair financial products and services.4. pecuniary Policy and the Federal Reserve The Federal Reserve governing body refers to the central banking system of rules of United States. Fed was launched in response to a series of financial panics. Federal Reserve Bank of Atlanta covers the states of Alabama, Georgia and Florida, 74 counties in Tennessee, 38 parishes of Louisiana, and 43 counties of Mississippi. William H. Rogers, Jr is the current Chairman of this Fed. This fed should remain politically independent because its rate is determined by market and is not explicitly determined by the Fed. The target for federal funds is adjusted by 0.25% or 0.50% at any given time. Fed give liquidity to banks to enable them gives credit in times of recession.Federal Open market Committee is a committee in Federal Reserve System that is charged with the responsibility of overseeing the countrys open market operations. Fed should decrease their rate to help spur the economy of US. This is expansionary monetary policy (Axilrod, 2011).5. o pen Trade I support free trade and the NAFTA. They are based on comparative advantage. Countries produce what they can export cut-rately. US exports goods like corn and meat to Mexico. Some of goods imported into USA hold snacks and processed fruits. However, despite the having the benefit of increasing growth and collaboration between countries, free trade has the cost of dumping goods into the country and destroying infant industries. Free trade should be restricted on some goods like infixed resources.6. Foreign Exchange US dollar is currently losing value against the euro. This is because the European Union is finding solution to Euro crisis. Dollars are supplied by the Central Bank of USA. A dollar loses value when its demand goes down. For example, whenever US citizens buy products from Germany, the demand for Euro goes up against the Dollar.A falling US Dollar increases ones travel expenses. This is because has to use more dollars to buy a foreign currencies which are expensive. However, a cheap dollar is bad for the US economy because it discourages exportation. A free locomote exchange rate refers to a monetary system whose exchange rates are free to move due to forces of the market without intervention by the government (Friedman, 2010).ReferencesAxilrod, S. H. (2011). Inside the Fed monetary policy and its management, Martin through Greenspan to Bernanke (Rev. ed.). Cambridge, Mass. MIT Press.APA data format by BibMe.org.Farmer, R. E. (2008). Aggregate demand and supply. Cambridge, Mass. National Bureau of Economic Research.Friedman, M., & Heller, W. W. (2010). Monetary vs. fiscal policy. innovative York Norton.Starr, R. M. (2011). General equilibrium theory an introduction (2nd ed.). New York Cambridge University Press.Source document