Macroeconomics Essay Example | Topics and Well Written Essays - 500 words - 1

Macro economicals - Essay Examplend to alarmingly rise if the inflation rate hits 5 or 6 percent consequently, when levels climb to double digit levels as it did in the mid/late 1970s, there was little surprise that Americans named inflation as the public adversary number one(Hellerstein). Recently, the U.S. has experienced low and stable rates of inflation 3.4% in 2005 and 3.2% in 2006 (Jensen) this has given rise to speculation among policy makers about achieving nobody percent inflation.Yes, I recommend the central bank to aim for zero inflation. The main reason is that zero inflation is best suited to achieve what every(prenominal) international monetary policy strives for maximum sustainable growth via the harm perceptual constancy conduit. This advice was put forward by Alan Greenspan, who had a distinguished calling as Chairman of the Federal Reserve from 1987 to 2006 he was succeeded in August 2006 by present Chairman Ben Bernanke. Greenspan repeated this advice many times during his 18 year career under 4 U.S. Presidents, namely, the fundamental aim of the Fed is maximum sustainable growth over time the primary role of monetary policy in the pursuit of this goal is to foster price stability. Economists deduced that Greenspan meant price stability will be achieved when economic growth is increased to the maximum with a stable price level meaning zero inflation. Greenspan confirmed their deduction during the July 1996 FOMC meeting when he said a zero inflation level would no eternal alter decision making. The famous Greenspan principle maximum sustainable economic growth is accomplished at zero inflation was born (Rasche et al.).Price stability should always remain as the explicit key objective for Federal Reserve Monetary Policy. There are several reasons for this. Price stability encourages economic growth it reduces interest rates, stabilizes financial markets and those economic sectors affected by interest rates it creates an environment th at permits money and the