Question

Conduct a library research to find three to five scholarly articles related to an optimal monetary policy in an open economy. Critique this topic by analyzing the strengths and weaknesses of the articles, and then propose a recommendation for future research.

Explain how an optimal monetary policy could influence the global financial crisis.

Answer 1

For the first half of the questions, please attach the articles to be reviewed.

An optimal monetary policy play an important role in influencing the global financial crisis. It influences the financial crisis by changing the prevailing rate of interest or real return on investment in the economy. A global financial crisis leads to fall in aggregate demand and recessionary gap in the economy. In this situation, Quantitative Easing or increasing the money supply in the economy play an important role in influencing the rate of interest in the economy. An increase in the level of money supplied leads to fall in the rate of interest in the economy and thus increases the level of investment in the economy and thus increases overall aggregate demand and thus reducing the impact of global financial crisis in the economy.

Thus, an optimal monetary policy can influence the global financial crisis and play an important role in helping the economy move out of recession.