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The United Stated Federal Reserve Board

1289 words - 6 pages

1. What is the Federal Reserve Board (the Fed) and how does it attempt to prevent and curtail unemployment?
The United Stated Federal Reserve Board (the Fed), a component of the Federal government, conducts monetary policy. The Fed essentially plays the role for the nation’s banks that these banks play for us. Just as we borrow money from the banks, the banks borrow money from the Fed. Just as we pay interest on the money we borrow, banks pay interest on the money that they borrow from the Fed. The Fed can use monetary policy to decrease unemployment by lowering the interest rate that it charges banks. If banks are able to pay a lower interest rate to borrow from the Fed, they are likely to ...view middle of the document...

Technically, this is plagiarism. (Central banks have an enormous impact on the economy-more than governments. They have the power to closely regulate everything from prices to job creation to incomes.) Other than one word this is also directly from the Stanford book.

2. What is inflation and how does the Fed attempt to prevent and curtail it?
Inflation is a general increase in the prices of all goods and services. Inflation occurs when the average level of prices in the economy increases over time. Even as overall prices are increasing, particular relative prices will change. The US Federal Reserve attempts to control and reduce inflation. Central banks focus is on strictly controlling inflation, protecting financial assets, and keeping labor markets strictly in check. Central Banks hold inflation more important than unemployment. Central Banks believe the only long-run impact of monetary policy is on the rate of inflation. They believe free-market forces in the real economy determine real output, employment, and productivity. To attain the targeted inflation rate, central banks influence credit creation and hence spending by frequently adjusting interest rates.

3. What is a recession and how are recessions related to unemployment? Using Marx’s concept of exploitation would it be easier or harder for employers to exploit their employees during a recession? Please provide your reasons for your conclusion.
A recession occurs when a country’s real GDP begins to shrink. Even a milder economic slowdown in which GDP continues to grow, but very slowly can create unemployment and dislocation. GDP and employment are positively correlated. As GDP rises employment rises, as it falls unemployment falls. Every recession starts with some negative change that reduces spending, production, and eventually employment in one particular part of the economy. The connection between recession and unemployment is a negative change in GDP that leads companies to lay off workers. Consumer spending declines due to people losing their jobs. Unemployment increases and investments decline even further.
Profit represented a new, more subtle form of exploitation: an indirect, effective way of capturing economic surplus from those who truly do the work. Marx tried to explain how prices in capitalism could still be based on the underlying labor values of different commodities. Marx felt it would be beneficial to pay workers at a level that less than the value of that worker's labor. I feel it would be easier to exploit workers during a time of recession. Since people are likely to be laid off during a recession there will be more people willing to work to make a working wage. A wage that is less than the value of ones work is better than not having a wage at all due to the...

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