ipl-logo

Expansionary Police Case Study

1639 Words7 Pages

Expansionary Polices; Monetary and Fiscal

Expansionary economic policy seeks out to expand the money supply to boost economic growth. This policy also comes from central banks, which focus on increasing the money supply in the economy. In fiscal term, a decline is defined as an overall slowdown in economic activity, and in an attempt to move the economy out of a recession, the government would implement expansionary economic policies.
The Great depression challenged the classical model with the reality of a long depression and high unemployment rates. Keynes attacked the classical model in two important ways, first the acknowledgment of error in the model and secondly by offering a different, well developed model …show more content…

Producers respond to this falloff in demand by producing less and laying off workers. The resulting unemployment further reduces demand. Recoveries happen when spending begins to rebound. However, even though demand begins to grow again, its level is below where it was when the recession started and far below where it would be if it had grown normally” (City Club, 2010). A recession is a situation where output growth is negative for two consecutive quarters, it is the period where unemployment rises, consumer and investor confidence falls and economy moves down. There are two main policies that aide in overcoming or dealing with recession, they are monetary policy and fiscal policy. Monetary policy is run by the central bank of a particular country while fiscal policy is run by the government of that respective country. During a recession, both government and the central bank are required to follow these policies, the government will follow expansionary fiscal policy and central bank will follow expansionary monetary …show more content…

There are three main tools used to support stronger economic recovery; Discount rate, which is the rate which Federal Reserve charges commercial banks while lending to them. To support a strong recovery, Federal Reserve must reduce the discount rate; this will reduce the borrowing cost of commercial banks and will lower interest rates. This decline in borrowing cost would mean higher consumption and investment expenditure in the economy, causing aggregate demand to increase. The increase in aggregate demand would cause GDP and employment to increase and would help the economy recover faster. The next tool is, the Open market operation, this is where Federal Reserve buys or sells government security in the open market, and as a result money supply is affected. To support the economy, the Federal Reserve will buy government securities from the open market, increasing the money supply in the banking system. As a result, the interest rate will fall and borrowings will be cheaper and there will be expansion in investment and consumption expenditures, which again causes aggregate demand to increase and just like with discount rate, the increase in aggregate demand causes GDP and employment to increase and helps the economy to recover faster. The last tool, reduction in reserve requirement, this is the required reserve ratio, which is the ratio of total

Show More
Related
493 Words | 2 Pages

Before the depression, the government did not involve its self in the economy too much, which caused America 's future economy to become weak and collapse after the market crashed and many other problems. The fiscal policy was put into order to prevent the economy from collapsing and to stabilize it. The policy was used to plan for the future, which would have still been in a great depression for longer than

Read More
624 Words | 3 Pages

The Great Recession was a period of general economic decline observed by world markets beginning around the end of the first decade of the 21st century. The recession was a result of a financial crisis in 2007 which effected the years to come . The primary source of this problem was that banks were creating too much money. In addition, banks had doubled the amount of money and debt in the economy. Resulting in a financial crisis as the government and banks had failed to constrain the financial system’s creation of private credit and money.

Read More
835 Words | 4 Pages

In the 1930s the United States of America dealt with the Great Depression with this cause there's a reason behind the story The timing and severity of the Great Depression varied greatly from country to country. The Great Depression was long and deep in the United States Perhaps unsurprisingly, the worst recession the world economy has ever experienced has a variety of causes. financial panic and misguided government policies will depress U.S. economic output. Although the government was struggling with the Great Depression and created the New Deal programs to support people, ultimately the more significant changes were in the economy unemployment and banks would close and society a huge increase in job losses and homelessness.

Read More
1231 Words | 5 Pages

[4] Besides, the economic crisis of the great depression, this time is hard. This recession is starting with the fall in agricultural prices. United States forced down the prices of all basic agricultural grains, agricultural recession due to the financial meltdown worsened, a speculative fever leads to large amounts of money back from Europe, followed by the Wall Street stock market crash of October 1929 there were scary. No market will result in plant closures, fewer goods, less cargo； It would endanger shipping and shipbuilding.

Read More
366 Words | 2 Pages

In Yellowstone there are only thirteen wolf packs (©AllTrip). Wolves cover a small portion of Yellowstone, and there are only around 400 in Yellowstone. Wolves predominantly feed on hoofed animals such as elk and deer. Wolves range in size from twenty-six to thirty-six inches tall and four to six feet long. Male wolves can weigh up to 130 pounds and females up to 110 pounds.

Read More
1220 Words | 5 Pages

Comparisons can be drawn between the Great Depression and Great Recession in terms of their causes. In the short term, the

Read More
982 Words | 4 Pages

A method the Federal Reserve has used especially since the Great Recession is quantitative easing. In this method, the Federal Reserve buys government securities or other securities on the market. These securities are also known as bonds. By purchasing enough bonds, the Federal Reserve lowers interest rates and increases the money supply, in theory stimulating the

Read More
527 Words | 3 Pages

The tool that is mostly utilized by the Federal Reserve is the so called Monetary Policy, which is best described as the activities that the Federal Reserve assumes in order to create a change or affect the credit and the amount of money that circulates in the U.S economy. By changing the amount of money and credits circulating through the economy, the Federal Reserve is able to control or have an effect in the cost of credits also known as interest rates, which would result as lower prices in interest rates, factor that promotes and positively affects the U.S economy. There are three tools that the Federal Reserve utilizes to influence the Monetary Policy: one is to buy and sell U.S securities in the financial markets, also known as open market operations, which main purpose is to influence the level on the reserves in the banking system, as well as

Read More
836 Words | 4 Pages

The Federal Reserve controls over the federal fund rates give it the ability to influence the general level of short-term market interest rates. The Fed has three main tools at its disposal to influence monetary policy which are the open-market operations, discount rate, and reserve requirements. b. Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and rate of the money supply, which in turn affects interest rates. The concept of Monetary Policy simply stated is that the cost of credit is reduced, more people and firms will borrow money and the economy will heat up. c. The controls that Federal Reserve used worked because the use of the three main tools the Fed uses is the most important that can manipulate monetary policy.

Read More
1083 Words | 5 Pages

Since there have been innovations in technology, transportation, communication, and financial services, revisions have been made to the act. This makes policies more fitting, for the economy. The Federal Reserve System is also responsible for promoting growth. Along with that they are responsible for maintain high levels of employment, and the stability of prices.

Read More
966 Words | 4 Pages

The Fed’s main desirable goals are low unemployment, economic growth, price stability or low inflation, and financial market stability. The Federal Reserve’s profession is to also encourage a “sound banking system” and a well economy. To reach this goal, the Federal Reserve has to fulfill as “the banker’s bank, government’s bank, and the nation’s money manager” (Investopedia). The Fed also sells and saves the government’s securities, which supplies the country’s paper currency.

Read More
777 Words | 4 Pages

What causes a recession is inflation. Inflation is a general increase in prices and the fall in the value of money. Falling confidence in the consumer can be a major cause in leading to a recession. Also, manufacturing orders starting to slow down in the economy, this can lead to less money being produced throughout the economy resulting to a loss of jobs. Since this causes a high unemployment rate many of the people will get on a government welfare program to pay for their family and that is even more money being lost in the economy, making the nation fall into a deeper recession.

Read More
729 Words | 3 Pages

This is done by lending reserves to banks when the banks need more for their own reserves. Typically, banks borrow from the Federal Reserve and pay an interest rate on the money that they borrowed which is defined as a discount rate. The Fed can use the discount rate to their advantage if they want to increase or decrease the supply of money in the economy. They increase the discount rate when they want banks to borrow less, which would deter the banks from seeking a loan and thus the money supply decreases. If the Fed wants to add more to the money supply, they would lower the discount rate.

Read More
711 Words | 3 Pages

In order the help end the recession the United States government along with the Federal Reserve used Fiscal and Monetary to help prevent a worst catastrophe. Fiscal Policies During the Great Recession, there were quite a few Fiscal Policies implemented. The first policy to be implemented was the Economic Stimulus Act of 2008.

Read More
2035 Words | 9 Pages

Its overall effect is the drop in the GDP of a particular nation. Gross Domestic Product (GDP) is considered by most economists as a serious indicator of strong economic indicator, so when GDP decreases or fallen for two or more consecutive quarters (Technical indicator the recession), then its sign of weaker economy. There are a few indications that can be used to foretell the beginning of the recession. 3.1 High of Unemployment Rate During recession, employment is likely to go down due to some factors. Some of them include: • Less activity, especially in trade due to less exchange of goods and services between individual.

Read More

More about Expansionary Police Case Study

Related Topics

Open Document