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Working with Federal Reserves Publications Assignment Essay Example

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Working with Federal Reserves Publications Assignment

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Inflation usually occurs when there is an excess demand, when prices rise when total spending made by consumers, business firms and the government go beyond the value of the total amount produced within a given economy (Roberts 2006). In relation to this, changes in monetary policies as well as fiscal policies contribute greatly to the level of demand which is affected by government purchases, total consumption and investments made (Roberts 2006). However, this has no actual connection to the price level that is similar to the actual price of a single commodity; especially if all other changeable factors are constant like income (wages) and the prices of other goods. The collective price level normally indicates that all other prices are shifting as well. Therefore, incomes usually rise and fall with the level of prices because income is obtained from the price and quantity of goods sold (Roberts 2006).Issues regarding shifts or changes in the economy are quite complicated sine in real terms output in answer to demand cannot increase beyond the full level of employment which triggers an increase in spending that can merely be attained at higher prices. This can be illustrated in the Philips curve where total demand can be slimmed down or increased in tandem with supply in order to attain full employment output with supply in order to attain full employment output with stable prices. Reality wise, demand is affected by difference in government spending and taxation (fiscal policy) or by the variation s in monetary factors that affects business investment spending. As a whole, it is difficult for the Federal Reserve to settle on the appropriate monetary and fiscal policy to be implemented. The reason behind this is because a policy of credit ease formulated to elevate demand to full employment level output also increases price levels of goods. On the other hand, a policy of monetary restraint intended to avert inflation requires going through layoffs or unemployment (Roberts 2006).To be able to attain an overall balance within the economy and deter inflation the Federal Reserve seeks stability in the balance of payments, full employment and price consistency that may necessitate adjustments in monetary/fiscal policies and exchange rates.The Federal Reserve finds means and ways to control the total supply of money and credit and the general level of interest rates. However, it does

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References

Ehrmann, M. and Fratzscher, M. (2007). Transparency, Disclosure, and the Federal Reserve. International Journal of Central Banking. Retrieved from http://www.ijcb.org/journal/ijcb07q1a6.pdf

Gurkaynak, R., Sack, B. and Swanson, E. (2005). Do Actions Speak Louder Than Words? The Response of Asset Prices to Monetary policy Actions and Statements. International Journal of Central Banking. Retrieved from http://www.ijcb.org/journal/ijcb06q3a6.pdf

Roberts, J. (2006). Monetary Policy and Inflation Dynamics. International Journal of Central Banking. Retrieved from http://www.ijcb.org/journal/ijcb05q2a2.pdf

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preview essay on Working with Federal Reserves Publications Assignment
  • Pages: 6 (1500 words)
  • Document Type: Essay
  • Subject: Business
  • Level: Masters
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