Reference no: EM131571600

Assignment

1) From my perspective, I believe the FOMC meeting is providing more transparency in general. The meeting is a proof that there is a fair economic system provided by the government, especially by the Fed.

2) I do not believe that the zero interest is necessary one. This is because, in my opinion, the economy has been stable with the steady growth since the Greek crisis few years ago. It is rather rapidly growing as it is going through the current 4th industrial revolution. Hence, I do not believe that the current economy is on declining path. The surprising fact is even though the Fed notified the world that it will raise interest rate, the world financial markets index are rapidly increasing. This can be viewed that liquidity trap is not going to occur. Also, I do not believe there would be an emerging economic recession soon since the Fed announced that the increase in interest rate would be 0.25% which is not that high.

3) Absolutely not. Since the zero interest rate policy has been imposed for approximately 7 years, it is definitely right time to increase interest rate. Thus, I am not worried about any inflation. If there is, it would be a necessary one. However, yet we do not know when is the right moment to impose this monetary policy and I believe this is why the Fed has not inflicted the change.

4) Quantitative easing would eventually create currency conflicts in between nations, but it is not going to be effective. As the Abenomics has created a temporary effect in Japanese economy, I do not think quantitative easing is a right kind of policy to boost the economy.

5) Yes, it will absolutely easy up the condition. The number of bad debts would be obviously lower than the higher interest rate.

6) Cutting the corporate tax rate may stimulate the new monetary policy, because firms would rather choose to invest on their infrastructure for future outputs with the money they used to pay for tax. During the process, getting loans from banks will be inevitable which will eventually boost the general economy and the fed's decision to increase interest rates.

7) Since it would be gradual tightening, in the short-run there would not be a recession. However, there might be a recession in the long-run, which can be substantiated by the subprime mortgage crisis.