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    monetary policy

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    I understand that monetary policy is an important tool of the federal reserve to regulate the interest rates and money supply which impacts the currency movement. It is also my understanding that the economy can adjust itself. Is it the fact that the economic adjustment takes too long? There must be a reason why the US does not utilize a "wait and see" approach.

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    Reasons for Adjustment
    The U.S. is the source of global economic slowdown. The continuous rapid expansion of the U.S. economy in the past 10 years has resulted in over-consumption and investment, giving rise to problems such as excess capacity and debt burden. Average debt ratio of the S & P 500 companies rose to 110% in the third quarter last year from 55% in the 1980s. Repayment burden of household consumer credit has already occupied 14.3% of disposable income, the highest since the 1980s. In order to cut debt, corporate investment and private consumption were lowered, leading to contraction of manufacturing activities. The National Purchasing Manager's Index had already been below 50 for ten consecutive months by May, whereas the Non-manufacturing Index also dropped drastically from last December's 61.6 to ...

    Solution Summary

    Monetary policy is evaluated.