1. When A War Is Declared, Many Of The Big Contracting

The Federal Reserve has the dual job of ensuring price stability and maximum employment, which are contradictory objectives. The Feds try to achieve the goals through monetary policy which determines the demand and supply of money by controlling interest rates. The Fed’s goal is to achieve a natural rate of unemployment of more or less 5%. When the actual unemployment figures are below the natural rate of unemployment, inflation increases and there is a high demand of goods and services propelling the economy with the ensuing labor demands and the pressure it places on wages, which in turn produces inflation. When the Fed is faced with this scenario, it must increase the rates to slow the growth and achieve price stability (contractionary cycle).

The war affected the private corporations and the federal government’s relationships in the sense that the war created more jobs for citizens, increased industrial productivity, and doubled corporate profits. The government needed materials for war and relied on private companies. The government was able to provide money, impacting the operation of private companies making them go into mass production. Private corporations had the risk of having no orders and over production at the end of the war, therefore, the government lended private businesses the money they required to expand their businesses and not let the fall into that risk.

Unemployment rate, one of the biggest macroeconomic indicators. Unemployment rate controls the rate of the economy, or GDP. If unemployment rate drops from 9.1% to under 5%, the entire economy would benefit. The job market would increase, total products produced would increase, and the overall standard of living would also increase. Employment is a key economic factor that affects all things economic.

There is always some unemployment resulting from workers failing to hook up with potential employers due to imperfect information. However, neither the demands nor supplies of labor nor the pattern of information among firms and employees is affected by inflation. Hence, inflation cannot affect the level of employment and unemployment and the Phillips curve is as shown. Both inflation and deflation have no affect on unemployment and output. Therefore, from this standpoint, all rates of inflation are optimal. Inflation simply does not matter.

Inflation is a general increase in the prices of all goods and services. Inflation occurs when the average level of prices in the economy increases over time. Even as overall prices are increasing, particular relative prices will change. The US Federal Reserve attempts to control and reduce inflation. Central banks focus is on strictly controlling inflation, protecting financial assets, and keeping labor markets strictly in check. Central Banks hold inflation more important than unemployment. Central Banks believe the only long-run impact of monetary policy is on the rate of inflation. They believe free-market forces in the real economy determine real output, employment, and productivity. To attain the targeted inflation rate, central banks influence credit creation and hence spending by frequently adjusting interest rates.

The Federal reserve needs to increase interest rates in the next year in order to reduce inflation. With low unemployment, the government is placing strain on the economy by lowering taxes and increasing spending. When the economy reaches its maximum output, prices increase while output remains the same. This could be what is happening now, with economic overheating on the horizon. However, the Federal Reserve could stifle this inflation by hiking interest rates over the next year. This would decrease the money supply and thus reduce inflation to its targeted level. It would also provide some leverage for the Fed to lower rates in the case of a recession.

A macroeconomic policy is known at the government’s regulations to control or stimulate aggregate indicators for the economy. In other words, these are policies that focus on providing solutions to help stimulate economic growth and fight financial situations; in this case the recession. The macroeconomic policy that would be a legitimate solution to the recession would be Fiscal Policy, but more specifically, Expansionary Fiscal Policy. The reason why this would be a legitimate solution is because unlike Expansionary Monetary Policy, it has a more direct effect on aggregate demand. In other words, the government will aim to increase how much money is spent in order to stimulate aggregate demand. Furthermore, potential tax cuts will serve as a catalyst for spiking aggregate demand by granting people the capability to consume and invest (Forsythe, 2012). As an ultimate effect, the recession that America is going through will show more direct signs of economic growth, and will not have much of an influence in sparking inflation in the long

The United States of America has always been involved with wars. From the American Revolution to the Iraq war, the U.S. is there. Now, when a country gets in a war, there are obviously positives and negatives associated with getting involved in a war, whether it is needed that they get into a war or not. Death is a serious negative when it comes to war, but if you look at the long term consequences that might come out of a war, then this might greatly affect the country. From an economic standpoint, a war can influence a countries economy greatly. A countries economy is very important when it comes to how that country stands and has influence in the world. A war can greatly impact that countries economy. It can either send that country into a great deficit, or it may have a positive influence on that country and send that country into a time of prosperity. Either way, after a war, a county’s economy will be effected by the economy.

Most people don’t understand Economic growth or what takes place in the economy with regard to inflation, unemployment, or interest rates. These things are all regulated by the central bank called the Federal Reserve System. The tope covered in this paper is the monetary policy which is the policy that decides if unemployment, interest, and inflation decreases or increases. The Monetary policy decides what price a person pays for an item at the store, how much interest a person will get charged on a loan for a car. This is something most people consider, most just look for the best price point or look where their money can go the farthest.

I agree with Paul Krugman. The Federal Reserve Bank should put more money into economy because it can stop increase inflation. I believe that if the Federal Reserve Bank will put in more money in the economy this would bring positive outcomes. Money putted in the economy will regulate number of inflation. Also, Arnold says that” If according to classical economists, the economy is self-regulating, then a recessionary gap or an inflationary gap is only temporary”(266). It is true that inflation gap can be stopped because it is temporary and if the Federal Reserve Bank would put money into economy it will help to stop inflation. Besides, if the Federal Reserve Bank puts money into economy to invested, more people will invest at low interest

America has made mistakes before, now the country plans out their economy’s future a little more. One of the top five largest economies in the world, the United States, promises for new laws regulating and decreasing in tax burdens in United States’ markets. Americans can expect to see a faster growth than previous years, and according to Forbes article The U.S. Economy In 2017: Welcome Higher Growth, “the U.S. economy will be a key driving force of other Western economies” (Chafuen 1). Especially now with the new president, Trump, he has already made the US more appealing and put a rise in stocks by electing certain cabinet members. This shows the world taking Trump 's approach seriously. The unemployment rate influences the economy. At

Central banks using contractionary monetary policy have many tools to help reduce inflation. Most commonly it is selling securities and raising interest rates through open market operations. Avoiding a recession and lowering unemployment is undertaken by expansionary momentary policy, interest rates are lowered, securities from member banks are purchased and other ways are used to increase the liquidity. “The Fed uses three main instruments in regulating the money supply: open-market operations, the discount rate, and reserve requirements. The first is by far the most important. By buying or selling government securities (usually bonds), the Fed—or a central bank—affects the money supply and interest rates.”

The Federal Reserve’s main purpose is to ensure price stability. It also helps the economy maintain its maximum rate of employment. When the economy falls, the rate of unemployment increases. To avoid this, the Federal Reserve lowers its interest rates hence encouraging investment and employment. Consumers can spend more hence lowering the rate of unemployment. Spending programs such as Unemployment Insurance, Medicaid, and Supplemental Nutrition Assistance Program were important during the recession. These government programs offer highly effective reactions to curb the recession. The programs offer income to certain groups of people. Fiscal policy, which involves a reduction in taxes and increasing government spending, help stimulate the economy. Tax cuts which focus on lower income people prove helpful. This is because the lower income people are more likely to spend whatever they get compared to those with high income. This helps boost the economy. Congress also plays a part in the recovery of the economy, even though it takes time. The spending programs offer a more automatic response. Congress authorizes policies which help boost the economy. Congress may increase funding to the

Monetary policy effects the GDP inflation. “Between 1996 and 2000, real GDP in the United States expanded briskly and the price level rose only slowly. The economy experienced neither significant unemployment nor inflation. Some observes felt that the United States had entered a “new ear” in which business cycle was dead. But that wishful thinking came to an end in March 2001, when the economy entered its ninth recession since 1950. Since 1970, real GDP has declined in the United States in five periods: 1973-1975, 1980, 1981-1982, 1990-1991 and

Monetary policy involves manipulating the interest rate charged by the central bank for lending money to the banking system in an economy, which influences greatly a vast number of macroeconomic variables. In the UK, the government set the policy targets, but the Bank of England and the Monetary Policy Committee (MPC) are given authority and freedom to set interest rates, which is formally once every month. Contractionary monetary policy may be used to reduce price inflation by increasing the interest rate. Because banks have to pay more to borrow from the central bank they will increase the interest rates they charge their own customers for loans to recover the increased cost. Banks will also raise interest rates to encourage people to save more in bank deposit accounts so they can reduce their own borrowing from the central bank. As interest rates rise, consumers may save more and borrow less to spend on goods and services. Firms may also reduce the amount of money they borrow to invest in new equipment. A