The Federal Reserve and the State of the US Economy
A review of the role of the Federal Reserve in the US economy and its impact on any future economic recovery.
# 153022 | 1,439 words | 2 sources | APA | 2013 |
Published on May 01, 2013 in Business (Finance, Investment and Banking) , Economics (National) , Political Science (Fiscal Policy (economy))
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The paper relates that the Federal Reserve currently views the US economy as being in a challenging position and also takes a negative view of the state of the global economy as a whole. The paper explains the Fed's tool of "quantitative easing" to address the inflation issue in particular and then outlines three main monetary tools, namely, open market transactions, the discount rate and the reserve requirements, that the Fed uses to promote price stability, economic growth and stabilize unemployment. This author relates that his own outlook for the economy over the next twelve months is not good; the author predicts that the economy is likely to continue sputtering, at least in terms of job growth and GDP recovery, with little opportunity for the Fed to do more, and with little likelihood of meaningful measures from Congress with respect to fiscal policy.
From the Paper:"The Federal Reserve currently views the US economy as being in a challenging position. Chairman of the New York Fed Ben Bernanke (2010) has noted that unemployment is a critical issue in the economy. The unemployment rate is around 10 percent, many of those employed are only employed part-time and many of the unemployed have become long-term unemployed. This increases the risk of structural unemployment, and there are other economic problems associated with such high levels of unemployment, including family finance strains (which could lead to increases in bankruptcies and foreclosures) and a loss of job skills, increasing the risk of the economy having too many unemployable people.
"The Fed has also identified the current low rate of inflation as a problem, especially given the current economic struggles. The twin threats of very low inflation - deflation risk - and high unemployment are combining to make economic recovery difficult. In particular, the Fed has cited that there is currently overcapacity in the economy and this must be addressed as well in order to stimulate growth.
"In general, the Fed takes a negative view of the state of the global economy as a whole. While it recognizes that financial markets - two years ago being illiquid and volatile - have stabilized, very little recovery has been noted either in the US or in Europe. Today, the Fed views the economic climate as being little changed."
Sample of Sources Used:
- Bernanke, B. (2010). Aiding the economy: What the Fed did and why. Governors of the Federal Reserve System. Retrieved November 28, 2010 from http://www.federalreserve.gov/newsevents/other/o_bernanke20101105a.htm
- Federal Reserve Bank of New York. (2010). Press release, November 3, 2010. Federal Reserve Bank of New York. Retrieved November 28, 2010 from http://www.federalreserve.gov/newsevents/press/monetary/20101103a.htm
Cite this Analytical Essay:
The Federal Reserve and the State of the US Economy (2013, May 01) Retrieved March 28, 2020, from https://www.academon.com/analytical-essay/the-federal-reserve-and-the-state-of-the-us-economy-153022/
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