Ashford ECO 406: Week 3 – Assignment
Due by Day 7. Monetary Policy and Macroeconomy. In a two- to three-page paper (not including title and references pages), answer the question “How does monetary policy affect the macroeconomy?” In your answer, include the following: • Explain the fundamentals behind why changes in the money supply have real effects on the economy and the monetary transmission mechanism. • Explain how monetary policy can be used to effectively stabilize output and smooth business cycles. • Evaluate the role of monetary policy and how it affects the macroeconomy given the implications of the financial accelerator. Support your work with at least two scholarly resources in addition to the textbook. You are required to format your paper according to APA style guidelines.
Monetary policy affects macro economy. Monetary policy deals with regulating money supply, which in turn affects the interest rate of the money. Monetary policy is a way of controlling money in a country. When money supply increases, the rate of inflation is high. In US the country has set a certain percentage that the country cannot pass in terms of inflation.
Monetary policy affects the amount of money that is to be circulated. Monetary policy influences growth by determining the demand of money which influences the change in interest rate which in turn influences the spending and saving behavior. Money supply…