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Us Monetary Policy

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Running head: Monetary Policy:

Monetary Policy

Monetary Policy
Introduction
The objective of this paper is to study the monetary policy and its impact on the economy. Monetary policy is the process by which the Federal Reserve Bank manages the supply of money in order to influence the economy. By regulating the supply of money, the Federal Reserve Bank controls inflation and price-stability, unemployment, and economic growth. The paper also provides some insight into the creation of money.

Details The U.S. is the world’s largest economy, and such its monetary policy has widespread implications both domestic and global. The objective of the policy is to influence factors like inflation, economic output, and employment by affecting demand for goods and services. This policy is carried out by the Federal Reserve System. The Federal Reserve (the nation's central bank), consists of the Board of Governors in Washington, D.C., and 12 Federal Reserve District Banks. Although accountable to congress and structured by law, the fed is totally separate from the departments that manage the country's spending decisions. Within the Federal Reserve System is another sub agency called the Federal Open Market Committee (FOMC), which consists of the Board of Governors of the Federal Reserve System and the Reserve Bank presidents. The FOMC holds eight regularly scheduled meetings during the year, and other meetings as needed. Monetary policy is generally referred to as either being an expansionary policy, or a contractionary policy. An expansionary policy increases the total supply of money in the economy, and a contractionary policy decreases the total money supply. Expansionary policy is traditionally used to combat unemployment in a recession by lowering interest rates, while contractionary policy has the goal of raising interest rates to...

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