Answer to Question #209164 in Macroeconomics for FAISAL

Question

impact of tight monetary policy on Consumer Price Index, employment and unemployment rate in any economy.

Answer 1

Federal Reserve major responsibility is to attain economic growth by bringing stability in prices. Nations have to pass through business cycles. At the time of recession, when there is no income, output and employment is there in the economy . At that time , federal reserve’s make use of expansionary monetary policy. To apply expansionary monetary policy federal reserve buys government securities and release liquidity in the economy.