00:01
Discuss how changes in the federal reserve's monetary policy affect at least one of the four components of gdp, consumption, investment, government spending, net exports.
00:09
Have the federal reserve's countercyclical monetary policies been effective in moderating business cycle swings? during every business cycle, be it a recession or depression or any other, the federal reserve has to deal with it by either increasing or decreasing the money supply in order to maintain stability in the economy with respect to inflation, interest rates, and money supply.
00:30
This is done by making some changes in the monetary policy.
00:35
Every policy is undertaken to counterattack the economic issues.
00:39
Federal reserve undertakes such policies by various methods, among which are open market operations, the fed rate, and changes in the reserve requirements.
00:48
Taking the case of open market operations, here the government bonds are bought and sold in the market, bonds are selling in the market, and in return money from the market is taken, thereby reducing the money supply.
01:00
And when bonds are purchased by the federal reserve, it means that money is being injected by the federal reserve in return for purchasing bonds.
01:08
This way money is either injected or taken out from the economy...