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Almost every aspect of government has an important economic component. A few examples of the kinds of economic policies that exist include: [1] Macroeconomic stabilization policy, which attempts to keep the money supply growing at a rate that does not result in excessive inflation, and attempts to smooth out the business cycle.
Monetary policy can be either expansive for the economy (short-term rates low relative to the inflation rate) or restrictive for the economy (short-term rates high relative to the inflation rate). Historically, the major objective of monetary policy had been to use these policy instruments to manage or curb domestic inflation.
Early proposals of monetary systems targeting the price level or the inflation rate, rather than the exchange rate, followed the general crisis of the gold standard after World War I. Irving Fisher proposed a "compensated dollar" system in which the gold content in paper money would vary with the price of goods in terms of gold, so that the price level in terms of paper money would stay fixed.
For instance, Michael Strain, director of economic policy studies at the American Enterprise Institute, told Politico that Trump’s talk of deporting undocumented immigrants could lead to higher ...
A hotter-than-expected inflation report last week dispelled hopes of relief for strained households and rekindled questions about U.S. policy for fighting sky-high prices. The Federal Reserve has ...
That is, the rule produces a relatively high real interest rate (a "tight" monetary policy) when inflation is above its target or when output is above its full-employment level, in order to reduce inflationary pressure. It recommends a relatively low real interest rate ("easy" monetary policy) in the opposite situation, to stimulate output.
The impact of Trump's trade and immigration policies, however, could also add to price and wage pressures, while the economy's overall strength holds risks as well that inflation may remain ...
Monetary policy is often referred to as being either expansionary (stimulating economic activity and consequently employment and inflation) or contractionary (dampening economic activity, hence decreasing employment and inflation). Monetary policy affects the economy through financial channels like interest rates, exchange rates and prices of ...