explain the Fed Reserve Chair Janet Yellen is considering a negative federal funds rate policy to...

explain the Fed Reserve Chair Janet Yellen is considering a negative federal funds rate policy to raise inflation to target levels. She’s tasked you with investigation the efficacy of this until recently mostly theoretically principle. Research your findings along with determination of what you believe will occur to the federal reserve board of governors and use picture and graphs to support your answers.

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A negative federal funds rate policy is a policy aimed at stimulating consumer demand and investment in the economy. It is a type of expansionary monetary policy adopted in various Euro zone countries like Denmark, Switzerland etc.
Ideally, a negative interest rate policy is not feasible to adopt in the long run because people don't give out money to others to lend it. However, at very low levels of AD it becomes important to keep interest rates low for sometime so as to spur demsnd and investment in the economy.
Though negativr interest rates can also lead to people lending money to make interest income and then hoarding cash and not invest anywhere. This can then have a negative impact on the economy.
Thus, complete check is needed to be kept on its implementation.
The role of Federal board of governors will increase as they will need to monitor from time to time that demand and investment are increasing as expected.

Rahul Sunny answered 1 year ago

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