U.S. Monetary Policy and What the Federal Reserve :: essays research papers

U.S. Monetary Policy and What the Federal Reserve does.According to the Congressional reckon Office fiscal policy is, The strategy of influencing movements of the money supply and delight rates to affect output and pomposity. An "easy" monetary policy suggests prompt growth of the money supply and initially inflict short-term worry rates in an attempt to extend aggregate demand, but it may lead to a higher(prenominal) rate of inflation. A "tight" monetary policy suggests s take down growth of the money supply and higher care rates in the near term in an attempt to digest inflationary pressure by lowering aggregate demand. In the fall in States it is the Federal Reserve System that is responsible for defining and implementing these policies. In the unite States the Federal Reserve is made up of a Board of Governors, which consists of seven members, all of whom are appointed by the president and confirmed by the Senate. Of these seven, the president appoi nts one to be president of the Board of Governors. The current chairman of the United States Federal Reserve is Alan Greenspan.With the appointment of Alan Greenspan to chairman, monetary policy in the United States changed from a monetarism view, an approach based on a ceaseless growth in the money supply, to a entangled policy. With a mixed policy, inflation is monitored and controled via the iterest rate that banks charge, along with an understanding of unemployment and business cycles.Only a few days ago chairman Greenspan adressed sexual relation and stated that the telephone exchange bank would keep raising interest rates and gave little clew of when it might stop. This increase of the interest rate would tend to slow inflation as well as possably decrease labor costs and increase productivity. The Federal reserve views labor costs as the most historic source of inflation, both because labor costs amount to more than two-thirds of lend costs and because they can feed a self-perpetuating spiral of higher prices and higher wage demands. So wat is the reason for the chairman of the Board of Governors to address congress? If the public is informed of the Federal reserves stance and commitment to lower or keep inflation in check we should see lower wages and in turn lower prices.