Monetary-Policy : The Experience of U.S. as Compared to Other Western Countries
DOI:
https://doi.org/10.17010/aijer/2017/v6i2/114126Keywords:
Price-Level
, Deflation, Inflation, Unemployment, Economic-Growth, Money-Supply, Internal-Devaluation, Interest Rate, Liquidity-Trap, Demand, Supply, Real Wages, Wage-Rigidity, Redenomination, ExportsE4
, E5, E6Paper Submission Date
, April 26, 2016, Paper sent back for Revision, January 27, 2017, Paper Acceptance Date, April 6, 2017.Abstract
Economic-growth is contingent on a variety of factors, but the price-level and the level of unemployment are important because the Central-banks gauge these two variables to decide the course of monetary-policy which is responsible for credit-growth and trade-cycles. The relationship between economic-growth and unemployment is crucial because now, every economy tries to minimize unemployment or maximize employment in the process of economic-growth and development. Nonetheless, economists have now accepted prices as the major driving force of economic-growth. They have now acknowledged prices as a sign of economic-activity. In the present paper, we analyzed the effect of prices on the economic-growth and development of the U.S. economy. Almost all the prices in the economy move in the same direction at a time, except bond-prices, even the price of capital and price of labor. During booms, prices rise and in busts, they fall. Prices in the U.S. economy were high during up-cycle and crashed during recession, but interest rates were unexceptionally low, which pushed the economy in the “liquidity-trap,†which is responsible for low spending and low economic-growth. It is suggested that the U.S. economy may go for an internal-devaluation, which means lower-prices and higher demand for both domestic and external economies to achieve full-employment.Downloads
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