Monetary Policies Influence on the Economy.
I. Macroeconomics Issue or Problem:
This paper will discuss the objective of monetary policy and its influence on the performance of the economy as it relates to such factors as inflation, economic output, and employment. Monetary policy affects all kinds of economic and financial decisions people make in this country, whether to get a loan to buy a new house or car or to start up a company, whether to expand a business and whether to put savings in a bank, in bonds, or in the stock market. Furthermore, because the U.S. is the largest economy in the world, its monetary policy also has significant economic and financial effects on other countries.
II. Summary of the Article:
The article discusses the Monetary Policy within the United States. It was published September, 21st 2013 within the economist publication. It discusses how the Federal Reserve is surprising everyone by changing nothing. The Federal Open Market Committee had a meeting on September 18th and the fed’s policy-setting body chose not to “Taper”, but would instead keep buying $85 Billion a month of Treasury and mortgage bonds with newly created money. Higher taxes and spending cuts have subtracted at least a full percentage point from growth this year; and the most important restraint on the fed was the unexpected effect on financial markets of a change in monetary stance. The fed’s balance sheet would keep growing and monetary policy would still be loosening. Although, the good news is that the Federal Census Bureau reported that real household incomes in America that had fallen by 8% between 2007 and 2011, did not fall further in 2012, but, the Income inequality has in the meantime, worsened on some measures. QE works in part by boosting household wealth and thus spending and jobs, but the effects have not yet filtered through strongly to the wider economy and the taps will be open a while longer. (Monetary Policy in America: Taper Tiger...