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This 3 page paper answers questions posed by a student on the economy. Various topics are explored. The paper is written in essay format. Bibliography lists 3 sources.
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3 pages (~225 words per page)
File: RT13_SA334eco.rtf
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holds the growth rate of the money supply constant while government expenditures are having an expansionary impact on the economy." In such a case, it would seem that interest rates
would adjust to a more natural rate. Whether that goes up or down depends upon the actions of the consumer and other factors. If government expenditure is altered, that can
change the rate of growth of the economy and affect a variety of factors such as inflation and unemployment. The Fed can use its tools of monetary policy in
order to bring the economy out of a recession. In fact, in the early part of the twenty-first century, interest rates were pushed lower and lower to tweak the economy.
Why is such policy successful? According to Keynesianism, both loose money as well as government deficits in the budget have a tendency to stimulate the economy, something that is
tied to job creation (Ebersole, 1995). To those who support the philosophy, the job of the government and its banking system is to create a balance in respect to the
risk of unemployment and inflation (1995). Although the people are often critical in respect to the actions of the Fed--reaction often varies by political party-- it is also said
that the cuts that came about during the 1990s were important in increasing the money supply during that recession (1995). If for example, the unemployment report demonstrates lower
than anticipated unemployment and there is upward pressure on wages, and if the goal of the Fed is to prevent inflation, what is the anticipated impact of the report on
the money supply, interest rates, and bond prices? Hall, Feldstein & Bernanke (2001) say that "unemployment is generally a lagging indicator." This means that unemployment is really not
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