Monetary Policy Paper

Monetary Policy Paper 1

Monetary Policy Paper

Chris Limon

MBA 501

Donna Danns

September 26, 2006

Monetary Policy Paper 2

Introduction

Fiscal and monetary policies focus on quickly returning the economy to sustainable, healthy growth. Any type of fiscal relief package will boost consumer and business spending and can augment the nation's long-term growth potential. Expansionary monetary policy can stimulate growth and provide insurance against the possibility of deflation. This paper will present information on four topics: (1) tools used by the Federal Reserve to control the money supply, (2) how these tools influence the money supply and in turn affect macroeconomic factors? (3) how money is created? (4) recommended monetary policy combinations that best achieve a balance between economic growth, low inflation, and a reasonable rate of unemployment.

Monetary policy is usually administered by a Government