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Wall Street Journal Article - Monetary Policy - Greg Ip, "Fed Chief Signals Rates Still To Rise," The Wall Street Journal, June 10, 2005, p. A4.
Title: Wall Street Journal Article - Monetary Policy - Greg Ip, "Fed Chief Signals Rates Still To Rise," The Wall Street Journal, June 10, 2005, p. A4.
Category: Science & Technology / Transportation
Details: Words: 1432 | Pages: 6.1 (approximately 235 words/page)
Wall Street Journal Article - Monetary Policy - Greg Ip, "Fed Chief Signals Rates Still To Rise," The Wall Street Journal, June 10, 2005, p. A4.
Summary
The FED has mentioned that the economy has left the soft spot behind and suggested that more interest-rate increases are to come. The fear of inflation was contained mentioned Mr. Greenspan, but did cite other risks such as: slowing productivity growth and evidence of increased pricing power. The federal funds rate has increased to 3% on its overnight loans since last June and will likely continue to increase.
Definition
This article is an example of monetary policy and its effect on aggregate demand. Aggregate demand …showed first 85 words of 1432 total…
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…showed last 85 words of 1432 total…banks to loan more and entices investors to borrow more. This results in the demand curve movement that increase investment form I1 to I2. This is represented in step three.
The effect that increased investment has on the recession is shown in the third graph. The increase in investment will shift aggregate demand forward from AD1 to AD2, though it will not completely close the recessionary gap. This initial shift will then be acted upon by the multiplier, carrying aggregate demand back to potential output.
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