The Federal Reserve - Essay Example

An important policy that has been implemented by the FED is the easy money policy. The easy money policy is important to allow money to flow through the economy at a lowered interest rate. The lowered interest rate allows money to be lent at a rate that is more appealing. The FED likely issued the easy money policy to increase investing and spending. Being able to achieve loans at a lower rate allows consumers to obtain loans. The banks giving the loans also benefit. The bank’s ability to offer the loans at a lowered rate increases the amount of loans that the bank is able to issue.

This type of policy reduces the amount of money that is held in the Federal Reserve’s. Allowing for more money to circulate and better lending rates can be a good thing in an attempt to boost a struggling economy. Allowing more money to circulate and spending to happen seem to be nothing but great news. This is not always so. The free flowing money and spending can lead to inflation. Inflation leads to higher prices. This is so because the dollar becomes worth less. The dollar being worth less means that it will costs more for an item.

An example of this is purchasing a loaf of bread. In a stable economy were inflation is not an issue, a loaf of bread can be bought for around $3.00. When inflation sets in, the same loaf of bread can be worth $4.00 or $5.00. .                   2010   2.63%   2.14%   2.31%   2.24%   2.02%   1.05%   1.24%   1.15%   1.14%   1.17%   1.14%   1.50%   1.64%   2009   0.03%   0.24%   -0.38%   -0.74%   -1.28%   -1.43%   -2.10%   -1.48%   -1.29%   -0.18%   1.84%   2.72%   -0.34%   2008   4.28%   4.03%   3.98%   3.94%   4.18%   5.02%   5.60%   5.37%   4.94%   3.66%   1.07%   0.09%   3.

85%   2007   2.08%   2.42%   2.78%   2.57%   2.69%   2.69%   2.36%   1.97%   2.76%   3.54%   4.31%   4.08%   2.85%   2006   3.99%   3.60%   3.36%   3.55%   4.17%   4.32%   4.15%   3.82%   2.06%   1.31%   1.97%   2.54%   3.24%   2005   2.97%   3.01%   3.15%   3.51%   2.80%   2.53%   3.17%   3.64%   4.69%   4.35%   3.46%   3.42%   3.39%   2004   1.93%   1.69%   1.74%   2.29%   3.05%   3.27%   2.99%   2.65%   2.54%   3.19%   3.52%   3.26%   2.

68%   2003   2.60%   2.98%   3.02%   2.22%   2.06%   2.11%   2.11%   2.16%   2.32%   2.04%   1.77%   1.88%   2.27%   2002   1.14%   1.14%   1.48%   1.64%   1.18%   1.07%   1.46%   1.80%   1.51%   2.03%   2.20%   2.38%   1.59%   2001   3.73%   3.53%   2.92%   3.27%   3.62%   3.25%   2.72%   2.72%   2.65%   2.13%   1.90%   1.55%   2.83%   2000   2.74%   3.22%   3.76%   3.07%   3.19%   3.73%   3.66%   3.41%   3.45%   3.45%   3.45%   3.39%   3.

38% It is important for the FED to make sure there is enough money in the Federal Reserve System to balance out the money that is floating around throughout the American economy. A monetary policy is put into affect for an important reason. A monetary policy allows for the government to control certain different aspects of the economy. Some of the aspects that are controlled are the Federal