Question

Visit the Fed's Summary of Commentary on Current Economic Conditions, 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. Use the updated 2020

Answer 1

Proposal recommending monetary policy actions designed to correct problems with:

Spending: Consumer spending has picked up with respect to non essential services which opened up, but there is lack of spending in the hospitality and leisure industry, the monetary policy could increase access to cheap credit facilities for such organisations working in this industry and increase capital spending in the long run, so that companies gain cheap credit for investments.

Provide relief to suffering industries such as real estate, travel and tourism by providing moratoriums and extending credit facilities.

Improve access to commercial bonds, so that companies are easily able to seek funds through such corporate bonds which have a good rating.

Ease bankruptcy processes so that businesses get to move on and liquidate if they are not able to survive and then spend whatever they have gained from liquidating.

Employment: The monetary policy would have to increase demand in the economy, which it would be able to achieve by increasing access to credit, providing businesses cheap credit so that they invest and hire more employees.

Provide employees with incentives which would lead to increase in demand by letting them consume more goods and services.

Encouraging banks to improve and enhance credit points so that more accumulate and people spend and demand more goods and services. This would lead to increase in employment.

Let banks ease the insurance payouts and unemployment benefits on time through the banking system, so that there are no discrepancies and people get cash on time to spend in the economy which will increase output.

Prices: According to the report, selling and input prices have remained unchanged, signifying that there is limited demand in the economy.

The monetary policy will have to maintain the level of inflation rate by adjusting the level of interest rates so that there is enough room left for monetary stimulus.

Thus all in all demand has to increase, which the monetary policy will be able to increase by providing as much liquidity as possible in order to drive up the prices or maintain the prices in light of supply chain disruptions.

Ease availability of health and safety equipment by providing cheap credit and faster loan processes for the healthcare sector.