Macroeconomic Case Studies :: essays papers

Macroeconomic Case StudiesThe hold titled cater Unlikely to Alter Course by John M. Berry of the majuscule Post takes an involutioning look at actions that Alan Greenspan his colleges of the Federal Reserve gene mark been taking over the last 9 months to muffled the economic ripening of United States. The astonishing growth rate of 7.3% is fueled by an economy that is in the midst of a high tech revolution. The article also explores the contrasting view of other economists that say that the Fed has change magnitude interest pass judgment too much in its attempts to slow the economy. The heart by which Alan Greenspan and the Federal Reserve have chose to slow the economy is through with(predicate) a monetary policy, or more specifically, an increase in the subject area interest rate. The article states that the Fed officials have come to a freehanded agreement that they will keep raising the pass judgment until growth slows to a more sustainable pace to make sure in flation remain under control. Because of the booming economy and the investment in the stock trade the exchange of money has increased for goods and run, which in turn increases the price take or the quantity of money demanded. By increasing the interest rates the Fed commits itself to adjusting the supply of money in the United States to meet that rate at a point of equilibrium. If the interest rate is increased, less goods and services are demanded, and therefore will slow down the economy and fell the rate of inflation. The article points out that as stock prices have move up over the last couple of years, so have American syndicate wealth and consumer spending. This is precisely the cycle that Fed officials want to interrupt to slow growth before it fuels more inflation. At the time this article was pen the stock market prices had fallen sharply especially in the applied science sector. But the Fed continued on the path to raise interest rates further noting that the index that they closely follow and contains a broader rabidness of public traded US stocks, the Wilshire 5000, is up for the year. Even though they began raising rates gradually 9 months ago, it takes almost a year for the economy to emotional state the full effects. In this case the results of the interest rates increased could be felt as last as the second half of 2000.