Question

Visit the Fed's Summary of Commentary on Current Economic Conditions (Links to an external site.), also known as the Beige Book. Prepare a proposal recommending monetary policy actions designed to correct problems with spending, employment, and prices. Defend your choices.

Answer 1

Answer :

There are following proposals to determine the issues identified with spending, employment, and prices.

(i) :- Spending behavior in all the states are as of now improving with an unassuming pace. It very well may be additionally accelerated with forceful credit offtake programs by the financial institutions. For this to occur, the Federal Reserve ought to diminish required reserve ratios as it will make more assets to be accessible for loaning. A normal and sustained discount, and promotional plans will increase marginal propensity to expend moreover. It will result into higher consumer spending. Federal Reserve ought to likewise keep Fed rates to be up to 0% to energize financial institutions.

(ii) :- The employment circumstance is additionally improving, however it very well may be accelerated through Federal Reserve supported subsidy and incentive programs for the business houses and corporate. It will go about as an impetus to industrial exercises and employment opportunities will be generated. Unique financial assistance programs should be given to companies with the goal that working capital issues are settled and industry can go for sustained activities for a long timeframe. It will have double advantages as number of employment opportunities will increase the disposable incomes. It will prompt increase in consumer spending, raising the aggregate demand. It will be a reason for production houses to increase the production exercises and gracefully.

(iii) :- Prices are increasing unobtrusively. Consequently, it doesn't present issues in the short run. In any case, it should be steady over the long haul with the goal that sustained growth in the economy is accomplished. It very well may be done through controlling cost push inflation.

Here, the Federal Reserve should take initiatives to control the prices of oil and other input factors. It very well may be done through downward development of cost, guaranteeing that the flexibly of inputs is adequately accessible. Controlling on export-import of raw inputs is likewise a measure that can be taken up by Fed.