Major pitfalls and benefits

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Reference no: EM131294784

Review the following:  https://www.federalreserve.gov/pf/pdf/pf_2.pdf (Links to an external site.)

It would seem that there is some agreement that monetary policy should not be used to stabilize the economy from short-term events such as a particularly bad hurricane or ice storm in the midwest.  However, there is substantial disagreement on how actively the Federal Reserve should attempt to stabilize the economy more generally.

Discuss briefly the major pitfalls and benefits you see from the Federal Reserve attempting to make changes to the economy over the next two years.  Finally, provide your opinion on how active the Federal Reserve should be and how far out they should be focusing.  Should the be concerned with a 10-yr horizon?  5? or 25?  Or, should they just have a constant growth target and let the economy fluctuate?   Keep in mind that they cannot control for actions of the President and Congress (Fiscal Policy).

Reference no: EM131294784

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