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Economic growth is something that everyone around the world struggles with everyday. Most people are oblivious as to what’s truly takes place in the economy with regard to inflation, unemployment, and interest rates; these things are all regulated by a central bank called the Federal Reserve System. The policy that I will discuss in this paper that decides if unemployment, interest, and inflation decreases or increase is monetary policy. Monetary policy decides what price a person pays for an item at the store, how much interest a person will get charged on a loan for a car. These are all things that nobody truly asks themselves, most people just shop around and pick the best price or the best interest rate that they can afford to pay.
Monetary policy consists of deliberate changes in the money supply to influence interest rates and thus the total level of spending in the economy. The goal is to achieve and maintain price-level stability , full employment, and economic growth (McConnell & Brue, 2004). The regulation of the money supply and interest rates by a central bank, such as the Federal Reserve Board in the U.S., in order to control inflation and stabilize currency. Monetary policy is one of the two ways the government can impact the economy. By impacting the effective cost of money, the Federal Reserve (Fed) can affect the amount of money that is spent by consumers and businesses (Investor Words, 2008).
The Federal Reserve System (called the Fed, for short) is the nation's central bank. It was established by an Act of Congress in 1913 and consists of the Board of Governors in Washington, D.C., and 12 Federal Reserve District Banks. Congress structured the Fed to be independent within t ...