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    Economic Principles Institutions Processes G-E.5: Money: The Fuel That Runs The Economy NAF 4/30/19

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    The business cycle refers to the long-term pattern of fluctuating economic activity in a nation between periods of economic growth and recession. During growth, businesses expand and create jobs, while during recessions businesses cut back on production. Monetary policy involves the Federal Reserve using tools like open market operations and adjusting interest rates to influence the money supply and credit in the economy in order to help the overall economy. Lowering the discount rate would make it cheaper for banks to borrow and lend money, increasing the money supply and encouraging more business activity and job creation to boost the economy out of a recession. Potential downsides include increased inflation, but taking risks to improve the economy can be worthwhile.

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    Economic Principles Institutions Processes G-E.5: Money: The Fuel That Runs The Economy NAF 4/30/19

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    The business cycle refers to the long-term pattern of fluctuating economic activity in a nation between periods of economic growth and recession. During growth, businesses expand and create jobs, while during recessions businesses cut back on production. Monetary policy involves the Federal Reserve using tools like open market operations and adjusting interest rates to influence the money supply and credit in the economy in order to help the overall economy. Lowering the discount rate would make it cheaper for banks to borrow and lend money, increasing the money supply and encouraging more business activity and job creation to boost the economy out of a recession. Potential downsides include increased inflation, but taking risks to improve the economy can be worthwhile.

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    The business cycle refers to the long-term pattern of fluctuating economic activity in a nation between periods of economic growth and recession. During growth, businesses expand and create jobs, while during recessions businesses cut back on production. Monetary policy involves the Federal Reserve using tools like open market operations and adjusting interest rates to influence the money supply and credit in the economy in order to help the overall economy. Lowering the discount rate would make it cheaper for banks to borrow and lend money, increasing the money supply and encouraging more business activity and job creation to boost the economy out of a recession. Potential downsides include increased inflation, but taking risks to improve the economy can be worthwhile.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    23 views9 pages

    Economic Principles Institutions Processes G-E.5: Money: The Fuel That Runs The Economy NAF 4/30/19

    Uploaded by

    api-448096857
    The business cycle refers to the long-term pattern of fluctuating economic activity in a nation between periods of economic growth and recession. During growth, businesses expand and create jobs, while during recessions businesses cut back on production. Monetary policy involves the Federal Reserve using tools like open market operations and adjusting interest rates to influence the money supply and credit in the economy in order to help the overall economy. Lowering the discount rate would make it cheaper for banks to borrow and lend money, increasing the money supply and encouraging more business activity and job creation to boost the economy out of a recession. Potential downsides include increased inflation, but taking risks to improve the economy can be worthwhile.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
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    of 9

    Economic Principles Institutions

    Processes
    G-e.5
    Money: The fuel that runs the economy
    Ronaldo Monterroso NAF 4/30/19
    What is the Business Cycle

    •The business cycle


    is long-term
    pattern of
    fluctuating
    economic activity
    in a nation.
    Two phases in Business Cycle

    •There are two phases in this cycle


    •Economic growth: businesses are growing
    and creating new jobs.
    •Recessions and economic decline:
    businesses cut back on the number of
    products they produce.
    Monetary Policy
    • Monetary policy mains what that Federal Reserve do two change the
    money in credit in economy the Federal reserve using monetary
    policy two help the economy.
    • Responsibility of federal reserve.
    • They must look after indicators
    • CPI
    • GDP
    Open market operations
    Open Market Operations:
    • When the Federal Reserve BUYS
    securities, money is released into the
    economy. The overall money supply
    gets bigger, and interest rates go down.
    • When the Federal Reserve SELLS
    securities, money is removed from the
    economy. The overall money supply
    gets smaller, and interest rates
    increase.

    -Government uses it to adjust the


    economy
    Discount Rate:
    • Discount Rate: This is the interest
    rate the Federal Reserve charges
    banks and other depository
    institutions for short term loans.
    • The discount rate right now is 3%.
    • Banks interest rate is more.
    If the Economy is in a Recession:
    During Economic
    growth/expansion…
    • Gross Domestic Product (GDP)
    INCREASES
    • Consumer Price Index (CPI)
    INCREASES

    During a recession…
    • gross domestic product (gdp)
    decreases
    • consumer price index (cpi) remains
    stable or decreases
    • Unemployment rate INCREASES
    Monetary Policy to Improve the Economy
    • To improve the economy:
    • federal Reserve increase the money
    supply and the amount of credit
    available.
    • Make more money open to business.
    • This is where the jobs come from.
    • I would recommend that the FED
    lowers the discount rate so banks
    lend out more money to banks and
    there is more money in the economy.
    Effects of this recommendation
    • Positives:
    • GDP up
    • Businesses give away more job
    • Unemployment down
    • More jobs

    • Negatives:
    • CPI and inflation may go up. But risks are important.

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