Sample Essay

The article sheds light on the macroeconomic concepts in relation to what Fed is trying to accomplish and is consistent with macroeconomic theory. It can therefore be established that by easing the monetary policy and buying treasury bills and other securities Fed is trying to increase the money supply and decrease interest rates. It is hoping to instill consumption and investment in the economy through these measures as the macroeconomic principles propose. However, the effectiveness of these measures in the practical scenario is yet to be seen. If all goes as planned Fed will be able to accomplish the goal it started off with. If it does not it could bring about terrible economic instability in the United States. Since it would set the price levels loose at higher ends and price levels do tend to be very sticky. If it throws the economy into hyperinflation (a period of very rapid increases in the overall price level) that too could bring about devastating results upon the US economy.

Furthermore, in order to take effect this monetary stance has to be backed up by the government of United States as stated in the article. To bring about confidence of underwriters to lend the loans to corporate sector and the confidence of corporate sector to believe in better business outlook. It also needs the support of financial institutions to mediate the process to the end users of credit lines. The government needs to take immense care in keeping a track of this monetary policy. It should proactively monitor the price levels, and core inflation levels so that a check and balance system is applied. It should compare these with the effects on GDP instilled through this policy. It should also do a cost and benefit analysis to see if such a risk is actually justifiable and the benefits in terms of GDP growth it is providing. This will help to take timely action to bring about remedial adjustments to the monetary policy.

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