FIN 350: Determine the most significant monetary policy that the Federal Reserve Bank has been responsible for implementing in the past 12 months and the resulting impact on the U.S. economy.
Determine the most significant monetary policy that the Federal Reserve Bank has been responsible for implementing in the past 12 months and the resulting impact on the U.S. economy.
- Analyze how the U.S. monetary policy affects the global economy.
Answer preview
Federal Reserve Bank (Fed) is responsible for monetary policy, which ensures price stability, and controls the market’s supply of money. During inflation, the monetary policy reduces liquidity and increases it in a recession to stimulate economic growth. In the last 12 months, the U.S. economy came to a standstill with unprecedented increased unemployment, high cash demand, and low-income supply due to business closure resulting from the Covid-19 pandemic. The Fed used three monetary policy instruments: reserve requirements, interest rates, and open market operation (Svensson, 2020). The three tools have been the most crucial, and this essay will discuss their impact on the U.S. economy.
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