Question

Is our current monetary policy a loose or tight monetary policy? What tools is the Federal Reserve using (like this week current)? Why has the Federal Reserve chosen this policy direction? Write two double-spaced typed pages.

Answer 1

Answer - We are in the phase of recession due to the corona virus pandemic and in such condition , fed has opted for the loose monetary policies in order to boost the demand in the economy. The FOMC has lowered the target federal funds rate through the open market operations by FOMC. It has set the inflation target of 2 % , reduced the interest rates in the economy for more lending to take place and boost the economy The economic activities are slow in the phase of corona , income and employment is less , hence the AD and AS both need to be boosted. Consumption and investment , need to rise. To do the same , fed as well as US government has formulated expansionary policies.