Goals of monetary policy are to "promote maximum employment, inflation
(stabilizing prices), and economic growth." If economists believe it's possible
to achieve all the goals at once, the goals are inconsistent. There are
limitations to monetary policy.
The term "maximum employment" means that we should try to hold the
unemployment rate as low as possible without pushing it below what
economists call the natural rate or the full- employment rate. Pushing
unemployment below that level would cause inflation to rise and thereby ruin
the other objective--stable prices, economic growth, which is our objectives
in the long run.
Overall financial stability will lead to a better balance between consumption
and saving that will make resources available for investment...
Excerpt from file: Goalsofmonetarypolicyareto"promotemaximumemployment,inflation (stabilizingprices),andeconomicgrowth."Ifeconomistsbelieveit'spossible toachieveallthegoalsatonce,thegoalsareinconsistent.Thereare limitationstomonetarypolicy. Theterm"maximumemployment"meansthatweshouldtrytoholdthe
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