U.S. Monetary Policy and What the Federal Reserve :: essays research papers

U.S. Monetary Policy and What the Federal grant does.According to the Congressional Budget Office monetary policy is, The dodge of influencing movements of the notes supply and evoke judges to affect output and inflation. An " diffused" monetary policy suggests faster growth of the money supply and initially cut short- border interest sends in an attempt to growing aggregate demand, but it may lead to a higher rate of inflation. A "tight" monetary policy suggests slower growth of the money supply and higher interest rates in the near term in an attempt to reduce inflationary pressure by intemperate aggregate demand. In the United States it is the Federal Reserve System that is obligated for defining and implementing these policies. In the United States the Federal Reserve is made up of a Board of Governors, which consists of seven members, all of whom are appointed by the president and confirmed by the Senate. Of these seven, the president appoints one to be chairperson of the Board of Governors. The current president of the United States Federal Reserve is Alan Greenspan.With the fitting of Alan Greenspan to electric chair, monetary policy in the United States changed from a monetarism view, an approach establish on a constant growth in the money supply, to a mixed policy. With a mixed policy, inflation is monitored and controled via the iterest rate that banks charge, along with an taking into custody of unemployment and business cycles.Only a few days ago chairman Greenspan adressed congress and stated that the central bank would keep raising interest rates and gave little hint of when it might stop. This increase of the interest rate would tend to slow inflation as well as possably moderate labor be and increase productivity. The Federal reserve views labor cost as the most important source of inflation, both because labor costs amount to more than two-thirds of total costs and because they can feed a self-perpetuating spira l of higher prices and higher wage demands. So wat is the reason for the chairman of the Board of Governors to address congress? If the public is informed of the Federal militia stance and commitment to lower or keep inflation in check we should see lower wages and in turn lower prices.