Question

Monetary Policy: What works?

Monetary policy by the US Federal Reserve is important for the US economy. However, economists disagree about several aspects of Federal Reserve decision-making powers including the composition of the Federal Reserve committees, Federal Reserve goals, and the actual impact Federal Reserve of policy on the economy.

• Should the Federal Reserve Board focus exclusively on the problem of inflation?
• What other goals are appropriate for Federal Reserve policy?
• What is the appropriate goal for the inflation rate?
• How should the Federal Reserve Board use its policy to achieve its goals?
• How effective is Federal Reserve monetary policy in achieving its goals?
• Is the composition of the decision-making bodies of the Federal Reserve appropriate for a democracy?

Please describe in detail

Answer 1

The main aspects of federal reserve is to (maximize employment, stabilize price,control long term interest rate, supervising banking operations, implement monetary policy).

✓ The federal reserve board should focus on the problem of inflation, because a rise in the price of daily or common goods and services directly influences the day to day living of a common middle class and below middle class individual of the Nation. This inflation negatively affects the living agenda of the common citizens and causes a financial crises throughout the nation, to control this faceless crisis the federal reserve should focus on the problems of inflation.

✓ By maximizing the output and maximizing the employment opportunities, increasing the economic growth of the nation, supervising the bank operations and controlling the interest rate Implementing monetary policy to control the inflation.

✓ An increase in inflation rate causes the common peoples in a faceless financial crisis,which affects the day to day living. By controlling the inflation rate the overall consumption of finished goods and services of the Nation. And aims at the growth and stability of overall economy of the country.

✓ The monetary policy if federal reserve is very much effective and flexible, the aim of monetary policy is to maximize the employment and increase economic growth by stabilizing the price and interest rates. For the past few years the US economy is in a smooth run due to the proper influence of federal reserve. And even in the covid19 pandemic the US economy is not facing any big threats as other developed nations are facing. Even in the pandemic most of the US companies are investing billions to foreign companies and the US govt is also providing financial supporting to most of the other countries and organisations.

✓ The federal reserve targets the development of economy by providing maximum employment. By providing maximum employment opportunities for the citizens poverty can be controlled and by supervising the bank operations they controls the interest rate which helps the individuals from being hunted by the interest rates, and control the inflation rate to provide a sustainable daily living environment. Federal reserve policies never controls the democracy by providing appropriate police to maintain the democracy.