Analyzing The Behavior Of The Fed Before And After The Most Recent Recession

1892 Words Dec 8th, 2014 8 Pages
This paper will analyze the behavior of the FED before, during and after the most recent recession. The analysis will begin in 2003 and continue through 2013. This paper will be divided into three parts. First, it will analyze the economic situation the FED faced in the time period aforementioned. Second, it will explain the FED’s actions during this time period, focusing on various monetary tools discussed in class. Third, it will explain whether the author thinks that the FED acted appropriately given the economic situation. It will consider six variables: the civilian unemployment rate, the personal consumption expenditures chain-price index, the M2 money stock, the velocity of the M2 money stock, the effective federal funds rate and the excess reserves of depository institutions. For each of these variables, the author will describe how each variable behaved. Based on this analysis, the author concludes that the FED did not act appropriately. From 2003 to 2007, the civilian unemployment rate steadily decreased. In 2003 the civilian unemployment rate was 6% and it reached its lowest point during this time period in 2006 and 2007, respectively, when the civilian unemployment rate was 4.6%. Each year the civilian unemployment rate decreased by 0.4-0.5%. In this paper, the percentage of personal consumption expenditures per year is equal to the inflation rate per year. Personal consumption expenditures (PCE) are measured in percent change from the previous year and are…
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