In the long-run, our economy continuously grows. Along this path of growth, there are periods of contraction that may lead to a recession or depression, as well as periods of expansion that may lead to inflation—these fluctuations in the economy impact employment, prices, wealth, distribution of income, and stability. Given the harmful effects of the peaks and troughs in the business cycle, the government uses a variety of tools to prevent, and reduce, and recover from these extremes. In Part 1 of the assignment, you will apply the various monetary policy tools that may be used to deal with inflation and recession. In Part 2, you will apply fiscal policy to deal with these economic problems. As you work through these assignments, you will investigate relationships and differences between the factors of production growth, the financial system, unemployment, inflation, and economic stability.
The Federal Reserve System has five key responsibilities: managing the national monetary policy, maintaining the stability of the financial system, supervise, regulate financial institutions, promoting a safe and efficient payment and settlement system, and providing consumer protection and community development. In order to maintain low unemployment, stable prices, and moderate long-term interest rates in the U.S. economy, the Federal Reserve Board (Fed) meets regularly to determine what changes need to be made to the monetary policy and financial regulation.
On behalf of the Fed, prepare an essay titled Inflation that answers the following questions on a Word document, in at least 275 words, and following APA guidelines.
· Describe the problem and impact that inflation has on the economy as a whole and the various economic entities (individuals, firms, financial institutions, etc.).
· Identify and summarize three specific monetary policy tools that the Fed can use to combat inflation.
o Explain how each tool may reduce inflation and how it impacts employment and growth.
Prepare another essay titled Recession, and answer the following questions on a Word document, with a least 275 words, following APA guidelines.
· Describe the problems and impact that recession has on the economy as a whole and the various economic entities (individuals, firms, financial institutions, etc.).
· Identify and summarize three specific monetary policy tools the Fed can use to combat a recession.
o Explain how each tool may reduce recession and how it impacts employment and growth.
