Monetary Policy and Inflation
Discussion Questions:
1. The Fed and Monetary Policy
Monetary policy is the action taken by the Federal Reserve to expand or contract the money supply and influence interest rates.
What are the current unemployment and inflation rates? How has the Fed redefined its targets for inflation and unemployment and how do current conditions compare to those targets?
As the top advisor to the chair of the Federal Reserve, define contractionary and expansionary monetary policies and explain which you advise the Fed to pursue today – given the inflation and unemployment targets versus the current rates.
2. Inflation – Winners and Losers
We often hear of inflation characterized as a bad thing, but Meyer describes both winners and losers from inflation. Give an example of one way in which you would win from unexpected inflation, and an example of one way in which you would lose from unexpected inflation.
Before answering the above questions, please review this Summary of New Fed Monetary Policies. You may consult other sources as well and include them in your bibliography.
