Monetary Policy Paper Essay Example

{draw:rect} {draw:g} {draw:frame} Monetary Policy Paper Objective I choose to research and write on the topic of monetary policy. My two main sources of information were www.federalreserve.gov and www.frsbf.org. From my research I would define monetary policy as the macroeconomic act of keeping the country financially stable. According to www.frsbf.org “The object of monetary policy is to influence the performance of the economy as reflected in such factors as inflation, economic output, and employment. It works by affecting demand across the economy—that is, people's and firms' willingness to spend on goods and services”. The information that I located suggested that the main issues that monetary policy deals with are inflation and unemployment which usually affect each other.

Monetary policy is the responsibility of the Federal Reserve System who put the main responsibility of monetary policy on their Federal Open Market Committee (FOMC). The FOMC meets 8 times a year and has 12 members who meet to discuss the state of the economy and what changes can be made to help the economy. The main tools used in monetary policy are the manipulation of short term interest rates which can greatly affect demand as well as manipulating the discount rate and reserve requirements.

There are mixed views as to the current state of our economy. Some say that they are headed toward another recession. Some say they are headed toward an economic recovery. While the economic outlook may be bleak for some, the Federal Reserve sees a brighter picture toward economy long-term growth. However, even the FOMC has not been able to place a timetable as to this bright picture occurrence. Characterizing the state of our economy is a difficult task to say the least. Economic indicators such as residential housing paint a positive economic picture. However, other economic indicators such as consumer confidence paint a more negative economic picture. It is amazing that a company