Questions about the Federal Reserve press release

1. What is the macroeconomics issue?

The macroeconomic issue that is under review is the labour market. According to the press release, the labour market has remained to be highly strong. For this reason, the economic growth and development have risen at a solid state. The labour gains have been intact as a result of a lower unemployment rate. During the first three months, the growth of household expenditure and business investments remained low. Additionally, the overall inflation remained lower than the anticipated two per cent. On average, the market-based measures have remained to be slightly lower in the recent past. In order to ensure that there is sustainable development in the labour market. The Federal Reserve has put in place various monetary policy issues targeting the labour market. Some of these policies include the interest rates, open market systems, and also an investment in the mortgage-backed securities. The bank has advised desk to participate in both the coupon swaps and dollar rolls in order to settle the security transactions.

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2. Why is this a macroeconomics issue?

The labour market needs to be consistent with the statutory mandate that has been put in place by the government. The goal of the labour related agencies is to maintain the targeted range for the funds at a rate of 2.25 to 2.5 per cent. The agencies have continued viewing the sustainable growth of the economy, structured labour market, and lower inflation rate. The issue is important as it will help the labour market agencies to make a future adjustment to the federal funds rate. Having the right figure will mean that the expected economic conditions will align with the maximum employment objectives. The assessment considers various types of information like the indicators of market conditions, the inflation pressures, inflation forecast, and also indices on the international developments and conditions. The Federal Reserve went ahead and came up with lots of decisions that would implement the monetary policies. One of the decisions is authorizing and directing the open market desk at the bank of New York until the bank was instructed otherwise. The bank also executed transactions found in the system open market account according to the federal open market committee. Additionally, the board of governors approved the establishment of the credit rates at the current level of 3%.

3. What are the key macroeconomic principles discussed in the article?

There are various key macro-economic principles that have been discussed in the article. The first principle is the money principle. Money is characterized as anything that acts as a medium of exchange. It is a commodity that can be acceptable in the form of payment of both goods and services. For a long time, global money was a valuable instrument that was widely accepted and recognized to buy and sell goods and services. As such, money is very important because it acts as a medium of exchange, offers a standard of value; it acts as a store of value, and also as a deferred payment. The other principle is termed as a specialization principle. All the factors of production are normally used in producing goods and services that entail the lowest opportunity cost. The factors of production need to be used in order to produce foods which may be of value during the production process. The proper use of those factors shows that all the factors are fully used when producing the mix of those goods and services. Additionally, the factors of production help in producing a mix of goods and services because society prefers the allocate efficiency. The third principle is called the institution’s principle. Institutions tend to evolve in all the market economies in order to help those people and group realize the objectives. Some of these institutions include the legal systems, government, and also the labour unions.

4. What is the macroeconomic impact of the article?

The article provides insight into how a market can operate efficiently. The market is ranked as efficient when the market operators (buyers and sellers) when they are given an opportunity to pursue their vested interest. According to Adam Smith, when both the buyers and sellers are allowed to freely pursue their interest, they are managed by an invisible hand to do what is right and best for society. Additionally, a market is assumed to be efficient when all the factors of productions are used to produce the good and services that are demanded by society.

The other economic impact is that the economy needs to regulate the issue of pricing. Prices are one of the greatest regulators of the market. This is because it determines the number of goods and services one is willing to provide and the amount of those goods that the buyers are willing to pay for. For this reason, it is important for the government to curb the market because it reflects the true demand and supply existing in the market. The buyer’s side is composed of the demand side, while the seller’s side is composed of the supply side.

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