Macroeconomics surveys trends in the national economy as a whole considering the study of the sum of individual economic factors. In addition, economic systems are subjective to several macroeconomic factors. A nation will strive for sustainable economic growth to improve the standard of living for its citizens. Even though, fiscal and monetary policy is used to influence the economy; a well define monetary policy has the ability to control and produce sustainable growth.
A booming economy will create money and produce goods and services for consumption. Industry is affected by factors such as GDP, unemployment, inflation, interest rates, and consumer price index. Fiscal (government) policy can help guide the economy toward a particular track without dictating a specific ending affecting tax, interest rates, and government spending (McConnell and Brue, 2005). Monetary policy attempts to achieve vast economic goals by regulating the supply of money through influencing outcomes like economic growth, inflation, and unemployment.
Both policies attempt to control or regulate the economy. "If monetary policy is doing its job, the government should maintain a relatively neutral fiscal policy, with a full-employment budget deficit or surplus of no more than 2 percent of potential GDP" (McConnell and Brue, 2005). Businesses face challenges accurately assessing the effects of GDP on their business, staying abreast of current economic trends, and employing strong forecasting firms (University of Phoenix, 2006).
The Monetary Policy Simulation showed practical ways of improving the GDP, decreasing unemployment, and keeping inflation within reasonable limits by regulating the money supply by changing the discount rates, applying open market operations and adjusting the required reserve ratio.
The Federal Reserve System is quite influential in our everyday interactions with investments, banks, as well as the unemployment statistics. The FRS can manipulate certain extraneous factors in order get desired results. Whether the Federal Reserve...