Question

in his New York Times column of May 27, 2005, economist Paul Krugman stated: “After all, the Fed’s ability to manage the economy mainly comes from the ability to create booms and busts in the housing market.” What do you think he means by that statement? Is it an accurate characterization of the Federal Reserve’s influence over the real economy?

Answer 1

By the statement that booms and busts in the housing market means the managing of economy is that in a country the most part of income is estimated by how much money is spent by people in the market if people are buying a large amount of commodities then it will directly boost the economy and if not their will be repurcussions in the economy. In terms of real economy it is one of the important characterisation as it shows that if people are more well offs or the country is in the chains of poverty so this shows the real economy of a country that how a country's citizens are spending in the market.