The economic performance is depicted using the notions of aggregate demand and supply. Early instances of recession and inflation led to economists instituting policies that aim to sustain demand and supply. The classical theory was the first approach provided by the scholars that dictates that government or any other independent body should not intervene in economic matters. The organization should let the situations correct themselves. Other theories enacted include the Keynesian approach and monetary or fiscal policies. The key directive of this essay is to evaluate how the monetary policies can alleviate problems of spending, pricing, and employment.
A report generated by Beige Books provides a summary of the current economic conditions in the United States. Many federal districts indicate a rise in consumer spending during peak and holiday seasons in every economic sector. The federal labor market also continues to improve with moderate increases in employment levels. The improvement has led to more wage pressures in the regions stemming from minimum salary increases. Price pressures, on the other hand, are minimal with few areas reporting price increases in the service sectors. The deductions show that the Federal Reserve divisions have healthy economic stands. The conditions erupt from the use of the monetary policies to manage the interest rates and money supply to stabilize the entrepreneurial cycles, enhance economic growth, and reduce inflation and unemployment (Federal Reserve District, 2016).
In America, the Federal Reserve undertakes the monetary policies through the utilization of three tools: reserve requirements, discount rates, and open market operations. They use the techniques to control the money supply. In some instances, the Federal Reserve leans towards the expansionary monetary regulations to counteract recession by enhancing spending, employment, and reducing the prices. While in other occasions it implements the contractionary policy to decrease inflation by increasing prices, reducing spending, and employment (Federal Reserve District, 2016). The directive is to achieve a balance or equilibrium between inflation and recession to stabilize the economy and provide moderate increases in spending and employment as well as the reduction in the prices.
Reference
Federal Reserve District. (2016). Summary of Commentary onCurrent Economic Conditions. Web. Retrieved January 21, 2016 from http://www.federalreserve.gov/monetarypolicy/beigebook/files/Beigebook_20160113.pdf.
