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Macroeconomic Impact on Business Operations
One of the greatest macroeconomic factors influencing day-to-day business operations and overall economic conditions in any country is the governmental application of monetary policy. Monetary policy consists of the use of tools to influence the supply of available money in a given economy. Through this manipulation of money supply, a government influences other factors such as GDP and inflation as well as unemployment and interest rates. It is with monetary policy that a government can endeavor to maintain desirable economic conditions. Federal Reserve chairman Alan Greenspan described the goals and difficulties of the implementation of monetary policy in 1994 as follows.
?move toward a posture of political neutrality ? that is, a level of real short-term rates consistent with sustained economic growth at the economy's potential. That level, of course, is difficult to discern and, obviously, is not a fixed number but moves with developments within the economy and financial markets. (Aspinwall 1995)
The goal of this paper is to examine the different aspects of U.S. monetary policy and analyze their effects on economic conditions. In addition, methods by which to achieve the best balance of macroeconomic factors will be discussed. Ways that money is created within the U.S. economic system will also be examined.
History of U.S. Monetary Policy
The supply of available money in the United States consists of two types: physical currency and checkable deposits. Currency consists of coins as well as paper money, also known as Federal Reserve notes. The United States Mint issues physical currency and distributes it f ...