Folks,
Today we talked about three things: banks, money, and the FED. The FED has the role of setting monetary policy. Like fiscal policy, it is one tool to try to "smooth" the cycles we often experience. In particular the FED tries to keep unemployment and inflation stable. This is a constant trade off between the two and sometimes fails to work. It can work in the short run but expanding the money supply leads to inflation in the long run. In other words, decreasing unemployment today will mean higher prices tomorrow.
Remember the purpose of banks and the roles of money as well as how the FED changes the money supply.
For next time please read the pdf file that I am emailing along with your final paper assignment and answer this question:
Why is national defense often the responsibility of the government? Is there a better arrangement?
We'll talk about this and about the major unifying concepts of this whole block.
Today we talked about three things: banks, money, and the FED. The FED has the role of setting monetary policy. Like fiscal policy, it is one tool to try to "smooth" the cycles we often experience. In particular the FED tries to keep unemployment and inflation stable. This is a constant trade off between the two and sometimes fails to work. It can work in the short run but expanding the money supply leads to inflation in the long run. In other words, decreasing unemployment today will mean higher prices tomorrow.
Remember the purpose of banks and the roles of money as well as how the FED changes the money supply.
For next time please read the pdf file that I am emailing along with your final paper assignment and answer this question:
Why is national defense often the responsibility of the government? Is there a better arrangement?
We'll talk about this and about the major unifying concepts of this whole block.
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