Question

What monetary policies can we get for an economy that is in recesión to recovery for the followimg sectors :

Housing
Fed funds rate
Consumption
Real GDP
Nominal GDP

Answer 1

Monetary policies which we will get for economy that is from recession to recovery for following factors are-

A. Housing-there would be lower interest rates for stimulation of demand and quantitative easing policy for the housing sector

B. Fed Funds Rate-these are on the lower side because the Federal Reserve would want to increase the money flow into the economy and they will be cutting on into Federal funds rate.

C. Consumption-consumption in the economy will slowly starts to pick up as the economy is recovering from recession to recovery.

D. Real GDP-Real GDP does not account for inflation and hence the growth rate would be very lower because the economy has just faced through a recession and it is starting to recover and Federal Reserve will also opt for quantitative easing.

E. Nominal GDP-it accounts for inflation and hence since the economy is slowly recovering the inflation would be starting to pick up along with the growth rate so it will start to grow and there would be a easy monetary policy in order to stimulate overall demand.