100%(3)3 out of 3 people found this document helpful
This preview shows page 1 - 2 out of 4 pages.
Alyssa RobertsWeek 3- National Debt BUS 655 Economic Decision Making in a Globalized Economy“The Federal Reserve (the Fed) defines monetary policy as its actions to influence the availability and cost of money and credit. Because the expectations of market participants play an important role in determining prices and economic growth, monetary policy can also be defined to include the directives, policies, statements, and actions of the Fed that influence future perceptions. Congress has delegated responsibility for monetary policy to the Fed but retains oversight responsibilities for ensuring that the Fed is adhering to its statutory mandate of “maximum employment, stable prices, and moderate long-term interest rates.” (Labonte, 2016). Since the federal reserve can’t control inflation or or employment directly so instead they use monetary policies such as market operations, the discount rate, and reserve requirements. (Investopedia, 2008). A few studies have been done to test whether or not businesses that monitor monetary policies investors can outperform the stock market. What these studies concluded isthat periods of expansive monetary policy are associated with strong stock performance meaning that the same is true when restrictive monetary policies are in place. Another thing found in studies was that small cap companies are more sensitive to monetary policies compared to large cap companies. The final thing that was concluded by the research was that U.S.