Introduction

Module 7 : Monetary Policy

Module Introduction

This module focuses on monetary policy. We discuss the objectives of monetary policy, the framework for achieving them, and the Fed’s monetary policy actions. Using the loanable funds market and the AS-AD model, we explain the transmission channels through which the Fed influences real GDP and the inflation rate. Lastly, we explain what is Quantitative Easing and how it has been implemented in recent years. (1)

Learning Objectives

  • Describe the objectives of U.S. monetary policy and the framework for achieving those objectives.
  • Describe the Fed’s monetary policy actions.
  • Explain the transmission channels through which the Fed influences real GDP and the inflation rate in the economy.
  • Explain the differences between expansionary and contractionary monetary policies.
  • Explain under what economic conditions expansionary and contractionary monetary policies are needed, and what economic outcomes such policies achieve. (1)

Reading

  • Learning Unit