Macroeconomics Monetary Policy Essay

1609 words - 7 pages

Francis E. Crespo-Gonzalez

ECON*5F70*010 April 6, 2011

Macro Economics

Part I Monetary Policy: Monetary policy in the United States is the responsibility of the Federal Reserve ("The Fed"), the nation's central banking authority. Federal Serve policymakers encounter about eight times a year to set monetary policy. They examine data on the state of the economy at the time and review forecasts of future economic circumstances. The monetary policy, the Federal Reserve affects the nation's money supply and helps outline the direction of the economy. The Monetary policy has two basic goals: to promote "maximum" sustainable output and employment and to promote “stable" prices. In the long ...view middle of the document...

Tax Policy: Tax has gone erratic as far as many people are worried. The income tax is determined by applying a tax rate, which may increase as income increases. Individuals and corporations are directly taxable. Government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in a determination to control the economy. The government also realizes the overall pace of economic activity, looking to maintain high levels of employment and stable prices. It has two main tools for reaching these objectives: fiscal policy, through which it determines the appropriate level of taxes and spending; and monetary policy, through which it

Francis E. Crespo-Gonzalez

ECON*5F70*010 April 6, 2011

Macro Paper

manages the supply of money. Economics proposes that increasing spending and decreasing tax rates are the best ways to stimulate aggregate demand. This tactic can be used in periods of recession or low economic activity as a critical tool for constructing the framework for strong economic growth and working on the way to full employment. Since Aggregate Demand can be affected by consumers, When Aggregate Supply curve shifts left because cost increases we see higher prices and greater unemployment. Tax cuts are designed to shift the Aggregate Demand curve when fiscal policy is proposed. President Obama has approved a two year extension to all the Bush-era tax cuts. This means that all 2010 Federal tax rates will be the same as 2011 rates, but many of this tax cuts enacted by President Bush in 2001 and 2003 are set to expire in 2010. These cuts were designed to help all income levels: America's low-, middle-, and higher-income workers.This tax bracket ranges and standard deductions levels increased because of low inflation. Budget Policy: As of March 25, 2011, the Total Public Debt Outstanding of the United States of America is $14.21 trillion and 97%of calendar year 2010's annual Gross Domestic Product of $14.66 trillion. This projected deficits or surpluses will change as the government changes its fiscal policy. The federal government is printing more money every time and Congress is raising the debt ceiling. Sooner or later, we will have to pay for this. Eventually, the U.S. economy will crash and we will have to create much more to earn less money. Nations that are making more and whose economies are “free” from public debt and government interference will ultimately grow. Trade Policy: Trade policy is a collection of rules and regulations which pertain to trade. Every nation has some form of trade policy in place, with public officials formulating the policy which they think would be most appropriate for their country. The purpose of trade policy is to help a nation's international trade run more smoothly, by setting clear standards and goals which can be understood by potential trading partners. In many regions, groups of nations work together to create mutually...

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