edf40wrjww2CF_PaperMaster:Desc
Monetary Policy in the United States
Abstract
The role of government in the American economy goes past just being a regulator for specific industries. There are two main tools for achieving these objectives: fiscal policy and monetary policy. The Federal Reserve sets the nation's monetary policy to promote the objectives of maximum employment, stable prices, and moderate long-term interest rates.
Monetary Policy in the United States
Monetary policy is the government or central bank process of managing money supply to achieve specific goals (wikipedia.org). The United States monetary policy affects all kinds of economic and financial decisions people make in this country. Whether to buy a car, or build a house, start a new company, or invest. The United States is the largest economy in the world, significantly affecting the economic and financial effects on other countries.
In 1694, the Bank of England was created requiring the ability to print paper money or notes and back them with gold (federalreserve.gov). The goal of the monetary policy was to maintain the value of the print notes. The industrialize nations set up central banking systems between 1870 and 1920. The Congress established the Federal Reserve System in 1913 to strengthen the supervision of the banking system and stop bank panics that had erupted periodically in the previous century. They were one of the last systems set up. At this time, it was clear that there was a business cycle, and economic theory began to understand the relationship of t ...