Studied by 0 people
Looks like no one added any tags here yet for you.
Goals of monetary policy
Price stability and nominal anchor (a tool that helps maintain price stability)
High employment or low unemployement
Economic growth
Stability of the financial market
Interest rate stability
Stability in foreign exchange markets
Should the Central bank be independent?
Case for Independence
YES:
Politicians can print too much money, causing inflation
Does not play politics so people will trust it more
Stops prices from going up too much
Prevents election tricks
Avoid big money problem
Lets experts decide
Should the Central bank be independent?
Case against Independence
NO:
Undemocratic, meaning the central bank will make decisions without answering to people
Unaccountable, don’t have to explain their decisions
Hard to coordinate, struggle with gov to balance money
Not always effective
FOMC
Federal Open Market Committee, meets 8 times and has 7 members
What is monetary policy?
The process where a central bank, like the Federal Reserve, controls the supply of money and interest rates that influence the economy. The goal is to achieve economic growth, low unemployment and controlled inflation.
Hierarchy mandates
Main goal is price stability, other goals like employment and economic growth are pursued only after stable prices are achieved.
Dual mandates
Aim for both price stability and maximum employment, treating them equally important goals.
Should price stability be the primary goal of the monetary poliy?
Price stability is the MAIN goal and should be maintained over long term, short term adjustments may be necessary to ensure stability but long term stability is KEY!
