U.S. S Use Of Monetary Policy example essay topic

Monetary policy is something everyone should know about. My teacher has an Uncle named Alan Greenspan that is directly involved with the U.S.'s use of monetary policy. When studied, people will learn that monetary policy is the policy used to fix interest rates and set those rates to stimulate the economy or to slow the economy down. In order to shed light on this subject, I have done research on the people that are in charge of setting the latest trends when it comes to using any type of monetary policy and that would be the Federal Reserve Bank or just the FED.

The Federal Reserve Bank in San Francisco shared some information to aid in learning all about how monetary policy effects macroeconomics. Okay, we have laid down the guidelines of what the paper is going to be about now, let's see what the book will have to offer. The book used for this class written by the Great David C. Colander states on page 328 that Monetary Policy is a policy of influencing the economy through changes in the banking system's reserves that influence the money supply and credit availability in the economy. (Colander p. 328) What does that mean? What are you saying Vern? Well, the monetary policy is different from the fiscal policy by the way it works in the Government.

A fiscal policy is controlled by the Government directly and the monetary policy is governed by a neutral party which is called The Federal Reserve Bank. The Federal Reserve Bank was set up by the Government to be neutral in order to not be influenced by anyone in the Government. This makes the FED meets with the Congress several times a year to report on monetary policy as well as the regulatory policy but we will discuss the regulatory policy later. In these meetings the FED talks about setting rates to control the flow of currency and credit in the economy.

(Colander p. 328 &329 web) My teacher wanted an article to complete this assignment but, in order to complete this assignment; I had to slide over to San Francisco to talk to the FED's about what they do and how they fit into the topic of a monetary policy. This is what I could find out; I was told that they are in charge of raising and lowering rates that effect people's and firm's demand for goods and services. Alright? I guess that is a good answer but I wanted more so I disguised myself and went under cover.

I got into the back with a worker uniform and found out that the FED is overall involved with raising and lowering interest rates but they are also involved in setting the borrowing costs, the availability of bank loans, wealth of households, and foreign exchange rates. By lowering the rates on interest's costs, people can borrow more money at the same cost it would it would return on a smaller amount if borrowed. As for the wealth of households, well the raising and lowering of the interest rates will determine how much family's incomes for the year. Lower interest rates in the U.S. will result in lowering the exchange value of the dollar which in return, lowers the prices on our exports to other countries.

On the flip side of the coin, lowering the interest rate raises the prices we pay for foreign-produced goods. (This means that when interest rates are low enough for me to buy a house, the Japanese are making money off me buying their electronics to fill my house. Yuk!) This is supposed to increase consumption of goods and services. (web) Moving along, I changed uniforms again to look like a person part of management and started giving orders. The employees at the FED in SFO were looking at me as if I was crazy but, they did answer my questions. I told them that I was new to the company and I wanted to get a feel of how the FED works on inflation. I was told, that "Wages and prices will begin to rise at faster rates if monetary policy stimulates aggregate demand enough to push labor and capital markets beyond their long-run capacities".

Wow! An example of this is when monetary policy is eased, consumers and businesses expect higher inflation later... The two parties will asked for higher wages and prices. If this happens, in the future, this will raise inflation without changing employment and output of the businesses.

I also asked if global markets depend on the U.S. 's. I was told "No, in this day and age of global competition, it might seem parochial to focus on U.S. capacity as a determinant of U.S. inflation, rather than on world capacity". Interesting? I could conclude from that statement that jobs in the U.S., inflation does not have any bearing on the world and the people employed in the U.S. are not in competition with the rest of the world because of their lower wages. (web) So, in conclusion, I can see a better picture of how monetary policy in America has an impact on all of us so, it is time for me to get out of here. Before I could do so, someone asked me for my I.D., I pulled off my disguise and the U.O. P t-shirt was exposed. Someone yelled "Stop him!" so I flipped over the table between me and the other managers to slow them down and ran for the front door.

I passed a guy I talked to earlier and told him he was fired. He looked at me and started crying. I ran some more and almost got caught by a security guard but, I slid between his legs to allure him. I could see the exit; I was almost their when I heard "Freeze!" I put my hands up and at the same time I saw another guard come around the corner to stop me. It so happens that that guard ran into the other guard which gave me a way out. I got into my car, speeded through the streets of San Francisco, across the Bay Bridge and on to my house in Alameda.

As you can see, I almost didn't make it but I was too fast for the average man. I can really conclude that kids, do not try this stunt at home and that monetary policy raises and lowers the interest rates to stimulate or to slow down the economy.