The FED's Expansionary and Contractionary Monetary Policies During and After the Economic Recession

The FED's Expansionary and Contractionary Monetary Policies During and After the Economic Recession

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During these hard times, people are facing one of toughest job markets in our nation’s history. Even though the media says economic recovery is imminent, many are still wondering when they will see the light at the end of the tunnel. The Federal Reserve Bank or FED is already being asked to prepare an “exit strategy” due to the concern that the expansionary monetary policy they used will quickly turn the recession into high inflation. This “exit strategy” can also be described as contractionary monetary policy and is going to be used to counteract the inflation sure to follow the economy’s recovery. Critics of this plan argue about when it should be implemented because it could make a recession worse or the inflation just as bad as the recession.
The Fed has been using expansionary monetary policy to increase the money supply, which increases demand and decreases unemployment. With open market operations the Fed can buy bonds in exchange for currency not in circulation, after the bonds are bought that money enters circulation. The fed does this to increase liquidity for banks that...

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