MOnetary Policy
The Central Bank of your country is practicing a stable monetary policy until a period of mass inflation hits. This can be seen in the rise in the cost of producing goods, a 6% drop in the unemployment rate, and the rising value of the stock market.
Economic Factors:
While changing the Monetary Policy for the Republic of Mandalia, we have to take account for many aspects of the county. First, we want to look at the percentage of people who are considered to be in poverty at the time. Increasing or decreasing the money supply would have different effects on poverty. Another thing our country is to take account fo is the amount of unemployment we have. Unemployment also plays a huge role in the amount of money that should be used within the goverment. Finally, we would have to take into account our GDP for the country. Since the GDP is extremely low for our country we would have to ensure that the monetary policy would attack that problem we have.
Economic Factors:
While changing the Monetary Policy for the Republic of Mandalia, we have to take account for many aspects of the county. First, we want to look at the percentage of people who are considered to be in poverty at the time. Increasing or decreasing the money supply would have different effects on poverty. Another thing our country is to take account fo is the amount of unemployment we have. Unemployment also plays a huge role in the amount of money that should be used within the goverment. Finally, we would have to take into account our GDP for the country. Since the GDP is extremely low for our country we would have to ensure that the monetary policy would attack that problem we have.
Elements of the New Policy:
Contractionary Policy:
Contractionary monetary policy is when the Federal Reserve uses the Federal funds rate and its other tools to slow economic growth. We have decided to use this policy to ensure that our country is taken out of this recession.
Contractionary Policy:
Contractionary monetary policy is when the Federal Reserve uses the Federal funds rate and its other tools to slow economic growth. We have decided to use this policy to ensure that our country is taken out of this recession.
Costs:
Slows Production-If the contractionary monetary policy overshoots the mark and tightens the economy more severely than intended, companies can button down production and shutter planned expansions. This can throw the economy into a recessionary loop. Increases Unemployment- Increased unemployment results from the slowing production and increasing interest rates. As companies slow their growth rates, they hire fewer employees. Increases in unemployment cost the government in increased unemployment insurance administration costs and social services expenses. |
Benefits:
Slow down inflation-The Fed can raise interest rates, making money more expensive to borrow. Slowing inflation by reining in economic growth cools off the markets and brings down overall demand--and prices go down with demand. Stabilize Prices: . A monetary contraction stabilizes prices in the market as the inflation slows. This increase in consumer confidence keeps the economy on an even keel and encourages stable spending patterns. |