Essay on Simulated crisis history

In the history of the United States, several simulated economy crises raised and induced worse impact on the economy. The central bank of the country requires appropriate monetary policy. The chair of the Fed has complete access to achieve full employment and low inflation. In the simulated economy there came several kinds of economic crisis such as fed rate fell below the benchmark limit, uncontrolled economic boom, and tight restrain the economy. These crisis caused to influence inflation rate and unemployment. For instance, tight restrain economy caused an increase in inflation. In the tight restrain economy crisis inflation was recorded as 3.47% and unemployment at 3.11%. In this situation, I applied to reduce in fed funds rate policy. I reduced fed funds rate from 5.50 to 4.75 that was resulted as a successful policy to make betterment in the economy (see the below attachments in the appendix).      

During playing this game I observed limitations and challenges associated with the monitory policy also. Selecting the right rate of fed funds along with the minimum inflation rate was the biggest challenge I observed in the whole game. Somehow, I also observed that monitory policy has the limitation that sometimes supports the economy crisis. Basically, monetary policy cannot deal with all influencing factors therefore sometimes other economic factors cause the monitory policy to bring changes.

    According to the historical data, the United States faced an economic crisis a number of times in the past few decades that was tackled by changes in monetary policy. For instance, in 2012, the United States faced a housing crash that influenced overall living standards and purchasing power of the citizens (AMADEO). Mortgages demand caused an asset bubble in housing. The interest rate was increased and inflation raised as a result. In that poor economic condition, the solution was made by increasing the Federal funds rate.     

                                                          References of Simulated Crisis History