The Role of Monetary Policy
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What is the role of monetary policy in influencing the relationship between production, employment, disposable income, and spending? Additionally, should the Federal Reserve Board of Governors remain independent--what is the strongest argument on either side?
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The solution discusses the role of monetary policy in influencing the relationship between production, employment, disposable income, and spending
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What is the role of monetary policy in influencing the relationship between production, employment, disposable income, and spending? Additionally, should the Federal Reserve Board of Governors remain independent--what is the strongest argument on either side?
As per tutor2u, "Monetary Policy involves changes in the base rate of interest to influence the rate of growth of aggregate demand, the money supply and ultimately price inflation." Thus, monetary policy is a policy which determines supply of money and cost of money.
Conventional monetary policy tools used by Fed to achieve the above objectives :
1) Controlling the Fedfunds rate
2) Open Market operations
3) Changing the Reserve requirements
4) Contractual clearing balances.
5) Discount window.
Key objectives of Conventional monetary policy are:
1) Maximize Employment
2) Moderate the long term interest ...
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