ch_26 - Chapter 26 Monetary Policy By Andrey Zagorchev...

Info iconThis preview shows pages 1–10. Sign up to view the full content.

View Full Document Right Arrow Icon
By Andrey Zagorchev Lehigh University Rauch Business Center, 211 E-mail: agz205@lehigh.edu Chapter 26 Monetary Policy
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Learning Objectives Monetary policy and the Federal Reserve’s monetary policy goals Federal Reserve’s monetary policy targets and expansionary and contractionary monetary policies Aggregate demand and aggregate supply graphs to show the effects of monetary policy on real GDP and the price level The Fed’s setting of monetary policy targets The arguments for and against the independence of the Federal Reserve
Background image of page 2
What Is Monetary Policy? Monetary policy The actions the Federal Reserve takes to manage the money supply and interest rates to pursue its economic objectives. 1 Price stability 2 High employment 3 Economic growth 4 Stability of financial markets and institutions The Goals of Monetary Policy The Fed has set four monetary policy goals that are intended to promote a well-functioning economy:
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What Is Monetary Policy? Price Stability FIGURE 14.1 The Inflation Rate, 1952–2006 The Goals of Monetary Policy
Background image of page 4
What Is Monetary Policy? High Employment The goal of high employment extends beyond the Fed to other branches of the federal government. The Goals of Monetary Policy Economic Growth Policymakers aim to encourage stable economic growth because stable growth allows households and firms to plan accurately and encourages the long-run investment that is needed to sustain growth.
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
What Is Monetary Policy? Stability of Financial Markets and Institutions When financial markets and institutions are not efficient in matching savers and borrowers, resources are lost. The Goals of Monetary Policy
Background image of page 6
The Money Market and the Fed’s Choice of Monetary Policy Targets The Fed tries to keep both the unemployment and inflation rates low, but it can’t affect either of these economic variables directly. The Fed uses variables, called monetary policy targets , that it can affect directly and that, in turn, affect variables that are closely related to the Fed’s policy goals, such as real GDP, employment, and the price level. Monetary Policy Targets
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Money Market and the Fed’s Choice of Monetary Policy Targets The Demand for Money FIGURE 14.2 The Demand for Money
Background image of page 8
The Money Market and the Fed’s Choice of Monetary Policy Targets Shifts in the Money Demand Curve FIGURE 14.3 Shifts in the Money Demand Curve
Background image of page 9

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 10
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 38

ch_26 - Chapter 26 Monetary Policy By Andrey Zagorchev...

This preview shows document pages 1 - 10. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online