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Suppose you are the chairperson of the Fed's Board of Governors at a time when the economy is depressed, and you are called to testify before a congressional committee. Write an explanation for an interrogatory senator outlining how your expansionary acts would operate and what would be the effects on the economy?

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Suppose you are the chairperson of the Fed's Board of Governors at a time when the economy is depressed, and you are called to testify before a congressional committee. Write an explanation for an interrogatory senator outlining how your expansionary acts would operate and what would be the effects on the economy?
The expansionary acts of the government would work to the benefit of the country in the following ways. In a growing economy, "New Money" created by the banking system plays a dual role:
1. New Money SUPPLIES the additional Money STOCK to meet the economy's growing DEMAND for money-inventory to service the growing FLOW of GDP spending. The amount of M1 stock needed to service the policy-desired rate (level) of GDP spending is equal to the current trend value of the MDR multiplied by the corresponding flow of GDP spending.

2. New Money is the chief financer of GDP growth -- by providing additional ("exogenous"-- not out of previous income) purchasing power for those who initially borrow the new money from money-creating (checkable-deposit) banks. Moreover, as that initial new money is re-spent again and again in its circulation around the economy, the initial spending is multiplied many fold. This Money Multiplier effect is limited only because, as the economy grows, new money becomes successively "locked into" the MDR-required level of individual money inventories
The expansionary acts of the ...

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Write an explanation for an interrogatory senator outlining how your expansionary acts would operate and what would be the effects on the economy?

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