Macroeconomics: Monetary Policy and Federal Reserve Essay

Submitted By mfarb11
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The article in which I decided to write my assignment on is title “Fed Meeting Shows Dissent on Measures to Lift Job Growth” from the New York Times. In the article it discusses a meeting The Federal Reserve had concerning its policy making. What has come up is that there are a few Fed officials that believe The Federal Reserve is doing more harm than helping the economy. As of right now The Federal Reserve has monthly purchases of $85 billion in treasury securities and mortgage-backed securities as well as keeping interest rates close to zero to help lower the unemployment rate. Some officials believe that such policies will encourage excessive risk taking and also make it harder to control inflation. While other officials say that more harm would be done if these policies were pulled away too soon. Another factor playing a role in the Feds policy making is if Congress continues to cut spending but they plan on reviewing the asset purchase policy at its next meeting. The Fed expects a slow improvement in economic conditions but does not expect the economy to expand fast enough to significantly reduce unemployment. Although some officials are worried that while unemployment remains high, people are being unemployed for long periods of time which is in return causing them to lose their skills, which can affect growth for years afterwards. With unemployment staying at a high rate it will continue to be determent in future policy making decisions. I chose this article because it was directly related to what we were just learning about in class. This article is great example of what all the government can do to control the economy. In class we discussed exactly what a fiscal policy was and what all is a part of it. We also learned how the government controls the economy. A fiscal policy deals with the federal governments day to day operations. In those operations would include the revenue the federal government makes. The federal government’s main source of revenue would be in taxes. Also included in the fiscal policy would be the federal government’s spending. The expenses for the federal government would be in consumption, transfer payments, and interest payments. When you subtract the expenses from what was made in taxes and you break even would be called a balanced budget. When you subtract the expenses from what was made in taxes and there is a positive amount left would be called a surplus. When you subtract the expenses from what was made in taxes and there a negative amount that would be called a deficit. When the federal government has a deficit it has to borrow money. The government borrows money in the form of selling bonds. In Keynesian economics it is believed that the federal government should intervene when necessary to help keep the economy balanced.
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