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Explain how monetary policy and actions by the Federal Reserve influence national economic goals of achieving full employment, controlling inflation, sustaining adequate growth, and achieving a stable balance-of-payments position? Which of these national economic goals have recent actions by the Federal Reserve addressed?

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The monetary policy and actions by the Federal Reserve can influence national economic goals. The Federal Reserve influences the national economic goals through managing the liquidity in the economy. The Federal Reserve can use a number of tools to control the money supply in the economy and uses these tools to affect the national economic goals. For instance, if the Federal Reserve reduces the interest rate then funds are available to businesses at lower rates of interest. This encourages the businesses to increase their investment. This increases production and more people have to be employed. This action increases employment and sustaining economic growth. The increase in the production by ...

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Hatim Baxamusa, MBA
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  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
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