The Federal Reserve Research Paper
The Federal Reserve is made up of five parts. Boards of Governors appointed by the president, it is also known as Federal Reserve board. It is an independent federal government agency and is located in Washington dc (Meade & Sheets, 2005). The second part of Federal Reserve is the federal open market committee which is composed of seven members of the Federal Reserve board. The team is also made up of twelve Federal Reserve Bank presidents. The members oversee the open market operations. The dozen regional Federal Reserve banks are also members. The team includes private member banks from the United States due to the acquired amounts of no transferable stock. The various advisory committees are also the members.
The difference between expansionary and contractionary monetary policy is seen from the fact that an expansionary monetary policy focuses on increasing the money supply in the economy. On the other hand, contractionary monetary policy focuses on reducing money supply in the economy. The central bank can adopt either of the policies to increase or decrease money supply in the economy.
Monetary policies reflect the source of the inflation. If the inflation is above the target due to the surge in the aggregate demand, contractionary policy is the one that would be used. However, if inflation is high because of excess supply and the federal government would adopt an expansionary policy.
The central bank can adopt either expansionary or contractionary monetary policy. The expansionary policy is a tool used to expand or increase the money supply in the economy. Contractionary policy, on the other hand, is used to decrease money supply in the economy. Whenever there is inflation, the central bank uses the appropriate monetary policy to decrease or increase the money supply in the economy.
References
Meade, E. E., & Sheets, D. N. (2005). Regional influences on FOMC voting patterns. Journal of Money, Credit, and Banking, 37(4), 661-677.
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