The Three Most Important Things I Learned in Economics Class :: Class Reflection

The three some important things I knowledgeable in Economics ClassThe first important concept I learned was the goals of monetary policy. The primary goal of a central jargon is price stability (low and stable inflation). Some of the Feds (short for the Federal Reserve Bank) early(a) concerns arehigh employment scotchal growthstability of monetary marketsinterest rate stabilitystability in foreign put back marketsThe Fed desires to maintain high employment because the condition of high unemployment, the alternative, creates lightheaded workers and idle resources. This leads to closed factories, unused equipment and materials, ultimately decreasing our GDP. Now, let me upgrade explain that the goal for high unemployment is not an unemployment level of zero, rather a level above zero where labor demand equals labor supply. This is cognize as the natural rate of unemployment.Economic growth focuses on support firms to invest or encouraging battalion to save, which in turn creates cash in hand for firms to invest. It runs hand-in-hand with the goal of high employment because in order for firms to be palmy investing in assets such as plants and equipment, unemployment must be low. Hereby, the people and resources will be available to spur economic growth.If financial markets are instable, it will lead to sharp contraction of economic activity. For example, in this most recent financial crisis, a deterioration in financial institutions difference sheets, along with asset price decline and interest rate hikes change magnitude market uncertainty thus, worsening what is called adverse selection and moral imperil. This is a serious dilemma created before business transactions arrive which information is misleading and promotes doing business with the most undesirable clients by a financial institution. In turn, these most undesirable clients later engage in undesirable behavior. All of this leads to a decline in economic activity, more(prenominal) ad verse selection and moral hazards, a banking crisis and further declining in economic activity. Ultimately, the banking crisis came and unanticipated price level increases and even further declines in economic activity. Interest-rate stability is very important for the Fed to control because otherwise consumers, equivalent you and I, will be reluctant to buy things like houses due to the variance which will make it harder to plan for the future.The value of the US dollar germane(predicate) to other currencies is a major consideration for the Federal Reserve. If they prevent colossal changes in the value of the dollar, firms and individuals can comfortably plan ahead to procure or sell goods abroad.