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1. Week 3 DQ1 – Recent monetary policy in the United States
One place to check for more information on recent monetary policy actions by the Federal Reserve is to review the most recent Federal Open Market Committee (FOMC) statement:
In this statement, the FOMC makes a statement about the condition of the U.S. economy, provides a forecast for the economy, and announces any monetary policy changes that it plans to make in order to stimulate the economy or to control inflation.
In the current FOMC statement, does the Federal Open Market Committee seem to be optimistic or pessimistic about the condition of the U.S. economy? Why?
2. Week 3 DQ 2 – Complications to successful monetary policy
In real life monetary policy tends to be more complicated than the Fed Chairman simulation. At times, monetary policy can have little (or no) effect on a national economy for a number of reasons. A first series of reasons includes time lags; it takes time for a central bank (like the Federal Reserve) to recognize that an economic problem exists, and then it takes time for a monetary policy action to show results in the economy. By analogy, a medication can take time to have a positive impact on an illness. A second reason is that contractionary monetary policy tends to be more effective at combating inflation than expansionary monetary policy does with combating recession or deflation.
Can you think of any other potential complications that could impact successful monetary policy?
