Contractionary and Expansionary Monetary Policy Paper

FEDERAL RESERVE??™S MONETARY POLICY
Federal Reserve??™s Contractionary and Expansionary
Monetary Policy
Tamara Thompson
University of Phoenix
UNEMPLOYMENT AND INFLATION
Among the economists such as Keynes and Samuelson, there was a strong belief that the relationship between low unemployment and permanent high growth shows inflation is high, and unemployment is exceptionally low (Landuyt, 2009, p. 1). The illustration of the Phillips Curve that shows when inflation is high, the unemployment is low (Figure 1).
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FACTORS OF OUTPUT AND EMPLOYMENT
_CONTRACTIONARY AND _EXPANSIONARY MONETARY POLICY TOOLS
(Table 1, Moffat, 2010)
The monetary policies come with an assumption that lower interest rates will actually encourage people and firms to spend and vice versa. These assumptions can be broken in case of a serious recession when everyone is busy saving for a rainy day or periods of a very high growth. The Fed can lower the rates but cannot force people to spend or banks to lend. It can also increase the rates, but if people think that the rates are not high enough, the economy will continue to grow (Bhaskar, 2009, p. 1).
_ECONOMIC _DEPRESSION
MONETARY TOOLS FOR OUR ECONOMY TODAY
CONCLUSION
References
Federal Reserve Bank of San Francisco (2010). US Monetary Policy: How is the Fed
Structured Retrieved February 28, 2010. Retrieved from
Free Dictionary (2010). Free Online Dictionary. What is the definition of a Robust Economy.
Henderson, D. (1999). Individual Liberty, Free Markets, and Peace write my essay for me please. Does Growth Cause
Inflation (Cato Policy Report, Vol. 21, No. 6, p. 1). Retrieved February 28, 2010.
Landuyt, G. (2009). The unemployment ??“ inflation theme. Givanomics (p. 1). Retrieved
Policy vs. Contractionary Monetary Policy. About.com Guide. Retrieved February
Tiebreaker, T. (2010). What is the difference between contractionary and expansionary
Monetary policy (p. 7). Yahoo Answers. Retrieved February 28, 2010. Retrieved from
Watson, M. (2005). The Coming Economic Depression (now called the Political, Economical,
and Spiritual Review). Retrieved February 28, 2010. Retrieved from

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