Problem
As you know the most important role of the Federal reserve system is to control Money Supply, and through changes in money supply achieve low unemployment, low inflation and economic growth. The most important monetary policy tool is Open Market Operation (Buying and selling of government securities or bonds). Through OMO the Fed controls money supply and the Federal Funds Rate. When the Fed sells Gov bonds, money supply decrease and as a result the Federal Funds rate increases. This is a restrictive monetary policy and is appropriate to combat inflation. When the Fed buys Gov bonds, money supply increase, as a result the Federal Funds rate decreases. This is an expansionary monetary policy and is appropriate to combat recession and high unemployment. For this discussion your task is to:
a) Discuss the impact of the monetary policy implemented by the Fed since 2020 to combat the the sharp economic downturn due to the Pandemic.
b) Explain the state of the economy right now.
c) Discuss the Feds' policy now.