Assignment:
You have now completed your analysis of the state of the economy and your analysis of fiscal policy. In this paper, you will conduct research into how monetary policy was used during the following three time periods in the history of the United States:
- The Great Depression years of 1929 to 1933
- The 1970s Stagflation from 1973 to 1982
- The recent recession that occurred in the years 2008 to 2010
Then after pulling your research data together, write a paper 4 to 6 pages in length (not counting the title page). Your paper should include the following:
1. In your first page after a brief introduction, you should define several key concepts that will be the subject of your research in this paper.
- Fractional Reserve Banking System
- The Money Multiplier
- Transmission Mechanism
- Money Supply; M1; M2
2. The body of your paper should focus on each of the three events one at a time and identify the monetary policy that was implemented during each of the events. Keep in mind that when covering a period of years you may not observe use of the three monetary policy tools each year, however, looking across the period of years you will see clear changes in the money supply that will demonstrate the expansionary or contractionary direction taken by the Federal Reserve during each event.
You should use your research to go beyond a simple statement of "the money supply increased" or "there was less money in the economy" and discuss how the money supply changed. What policy tools were used? How much did the money supply change? Did the economy expand or contract as a result?
3. Then at the end provide a brief summary of how monetary policy was used during each event and discuss the impact on our macroeconomic variables from Week 02 (GDP; Unemployment; changes in the price level, either inflation or deflation) from the beginning to the end of each time period.