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Contractionary and expansionary monetary policy paper

FEDERAL RESERVE??™S MONETARY POLICY Federal Reserve??™s Contractionary and Expansionary Monetary Policy Tamara Thompson University of Phoenix UNEMPLOYMENT AND INFLATION Among the economists such as Keynes and Samuelson, there was a strong belief that the relationship between low unemployment and permanent high growth shows inflation is high, and unemployment is exceptionally low (Landuyt, 2009, p.

1). The illustration of the Phillips Curve that shows when inflation is high, the unemployment is low (Figure 1). {draw: frame} FACTORS OF OUTPUT AND EMPLOYMENT _CONTRACTIONARY AND _EXPANSIONARY MONETARY POLICY TOOLS (Table 1, Moffat, 2010) The monetary policies come with an assumption that lower interest rates will actually encourage people and firms to spend and vice versa. These assumptions can be broken in case of a serious recession when everyone is busy saving for a rainy day or periods of a very high growth. The Fed can lower the rates but cannot force people to spend or banks to lend. It can also increase the rates, but if people think that the rates are not high enough, the economy will continue to grow (Bhaskar, 2009, p. 1). _ECONOMIC _DEPRESSION MONETARY TOOLS FOR OUR ECONOMY TODAY CONCLUSION References Federal Reserve Bank of San Francisco (2010).

US Monetary Policy: How is the Fed Structured Retrieved February 28, 2010. Retrieved from Free Dictionary (2010). Free Online Dictionary.

What is the definition of a Robust Economy. Henderson, D. (1999). Individual Liberty, Free Markets, and Peace . Does Growth Cause Inflation (Cato Policy Report, Vol. 21, No. 6, p. 1).

Retrieved February 28, 2010. Landuyt, G. (2009). The unemployment ??“ inflation theme. Givanomics (p.

1). Retrieved Policy vs. Contractionary Monetary Policy. About. com Guide. Retrieved February Tiebreaker, T. (2010). What is the difference between contractionary and expansionary Monetary policy (p.

7). Yahoo Answers. Retrieved February 28, 2010. Retrieved from Watson, M. (2005).

The Coming Economic Depression (now called the Political, Economical, and Spiritual Review). Retrieved February 28, 2010. Retrieved from

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