Question

First, please summarize the current monetary policy stance of the Federal Reserve, and the decisions announced at the most recent FOMC meeting.

Second, discuss their likely implications in the aggregate supply-aggregate demand framework. Make reference to specific passages or pages in the textbook in your answer.

Answer 1

• in the recent FOMC meeting held in June, the authority has taken various effective steps for the functioning of the economy.The meeting was conducted by keeping the point at center of the adverse impact caused by COVID-19
• the most important is buy back the security from the market so the there could be an effective flow of funds in the economy.

IMPLICATION OF AD/AS IN THE ECONOMY-

covid-19 has badly affected the business and services activities,millions of people are under the threat of financial crisis,several are under the threat of job loss,bankruptcy,banks are under stress concerned with the recovery of debts and increased NPA in their financial book.

the above is the reason for the recent monetary policy and its implication which would lead to lubricate the economic speed and economic development.

1. when the funds would be available in the market then,producer would be able to reinitiate the business activities therefore the employees would get work and wages and as a result there would be less unemployment in the economy.
2. when the unemployed persons would get the work they would spend it for the consumption purchase,thus the overall demand for goods and services in the economy would rise.
3. producers would tend to produce more and this would enhance the level of production.thus the business supply would also increased in the economy.