Role of Federal Reserves, Policies Implemented, Issues of Healthecare (Essay Sample)

Economics
Name
Institution
Economics
Question 1
The role of the Federal Reserve
The purpose of the Federal Reserve is to act as the central bank of America. The Federal Reserve has the obligation of making sure there is maximum employment, moderate rates of long-term interest, and stable prices of commodities. The Federal Reserve has three main functions that facilitate its operation to serve the country. The three main functions are to regulate the bank operations, supervise, conduct monetary policy and maintain effective systems for payment (Bernanke, 2013).
The most essential tool that Federal Reserve uses to adjust the economy includes adjusting of discount rate and reserve requirement. In a way, the Federal Reserve acts as a lender to other banks at lower discount rates. Another tool that is used by the Federal Reserve is how to conduct the monetary policy through the selling and buying of government securities. The Federal Reserve trades the selling and buying of securities in open market operations. The (FOMC) Federal Open Market Committee carries out purchase and sale of the American government securities in the open market to affect the growth of credit and money as well as the impact the short-term interest rates. The requirement of the reserve is a percentage of funds the bank should hold in reserve and set aside.
How monetary policy was used to combat the Great Recession?
The Federal Reserve had to cut the Federal Funds rate during the current crisis since it was their primary tool. The rates continued to be cut six more times and were at 2% during the month of April 2008. As a result, The Fed paused on the Lehman Crisis and then cut the rates twice in October and December the same year. The rates had reached a current target of between 0% and 0.25%. In a way, Fed thought that reducing the rate would heal the damage inflicted in the financial markets. As 2008 ended, it became clear that the financial markets did not respond to cut off rates (Bernanke, 2013).
In normal circumstances, the Federal Reserve conducts the open market operations by selling and buying short-term instruments from the Treasury. During December 2008, Fed widened the variety of securities to include mortgage-backed and agency bonds. The purpose of Fed buying the paper was to develop the market conditions of the mortgage market. For example, Fannie and Freddie bought the mortgages from the banks and sold them to the highest bid price to the investors. When people are reluctant to purchase Freddie and Fannie paper, the people who want mortgages will have to pay the highest rates. As a result, Fed had aggressively purchased the paper so that the mortgage rates will decline. The Federal Reserve was trying to reduce the rates of mortgage through these actions.
Purchasing of the long-term Treasuries will improve the market conditions through the private credit market. The Federal Reserve will lower the yield and increase the price of the Treasury bonds to make them attractive to investors. When the investors are trying to bargain whether to buy corporate bonds, the action of the Fed will look somehow attractive to lowering yield Treasuries (Bernanke, 2013). It makes it easy for the corporations that will borrow money in the future.
What policies did the Fed implement, and how successful or unsuccessful did they seem to be?
In brief, it was clear that the Federal Reserve had to chip in because the economy was sharp slowly, and credit markets were in trouble. The duty of the Federal Reserve was to step in and take extraordinary measures that would save the American Economy. They had to cut the rate to zero virtually and announce the addition buying of short-term securities, agency mortgage debt, and long-term Treasuries (Bernanke, 2013). Hopefully, it will shorten economic crisis through restoration of credit markets.
The policies that Fed used were to involve in the provision of liquidity directly to investors and borrowers in the credit market. (AMLF) Asset- Backed Commercial Paper Money Fund Liquidity Facility, (MMIFF) Money Market Investor Funding Facility, (CPFF) Commercial Paper Funding Facility were the tools that were used to provide liquidity.
The Federal Reserve has been partially successful in its effort to solve the great recession that hit America. The implementation of the policies has caused the inflation of the budget. Some of the solutions can only work in the short run and although some of the problems have been solved. The economy of U.S, today, does not operate at full capacity hence making it difficult to conclude that the economy has recovered. There are many people still unemployed in U.S revealing the implementation of the policies has not influenced the development. The huge expansion of the Federal Reserve's balance sheet shows a threat to inflation. According to research, many economists have the idea that the approximate relationships between change in the price level and money supply will result in inflation. In addition, monetary expansion is not believed to work by many economists in the short run since the output is below the maximum and unemployment is greater than standard. When the U.S economy recovers, inflation will increase over the years.
Question 2
Who suffers during a recession?
The labor has declined since the Great Recession and the effect have been longer and deeper than in the early 1980s. The effects of labor markets were not uniform across the demographic groups. The Men Hispanics, blacks, youth and those of low education have experienced more unemployment compared to women prime-aged workers, whites and those with higher education. One can understand that the recession does not affect other individuals, even though they are in the same economy. The demographic groups have been stable since the recession and expansionary periods.
The increase in loss of job by the youth is because of the occupation in the industry with older persons. There is no opportunity for the Hispanics, blacks and youth exploit their skills since there are other people occupying the positions. The Great Recession correlates with unemployment, but it is not the real cause of unemployment. There are other factors that cause unemployment among the blacks, youth and Hispanics and ensure that whites continue to get employed.
The education level is important to be considered when looking for a job in certain industries. Men with low education have limited, or no employments since the employers prefer people of certain education level. Here, Great recession correlates with education, but it is not the main cause of unemployment among job seekers. People with higher education level tend to attain the best positions that are relevant to the industry.
There is a perception of racial segregation since statistics shows that blacks, Hispanics and youth do not maintain the job position. From the article, it is evident that whites can get more jobs than the alienated demographic groups. It is hard for them not to lose jobs as compared to blacks and Hispanics. Again, one can see that the Great Recession is not the cause, but it correlates with ethnicity. Various factors have contributed to the limited opportunities among the demographic groups. Great Recession correlates to unemployment, but other factors have reduced chances in the demographic groups. It has been a challenge for the minority groups because of the negative energy that people perceive in them. As a result, whites and women have the privilege of getting the best jobs in these industries. The issue of race has blinded people in selecting the best people and giving equal opportunity to people who deserve. It will remain a challenge and with the effect of the Great Recession, limited opportunities will be available for the industries.
Question 3
Key Issues about Health Care
Amitabh Chandra's and Jonathan Skinner's article Technology Growth and Expenditure Growth in Health Care explores the relationship between the technology growth in health care and the expenditure growth in the USA. The article addresses the concern about Medicare and Medicaid because they seem unsustainable with the resulting increase in taxes. The concern is why there is increasing expenditure whenever new health care technology is implemented. Economists have pointed out that the increase in expenditure is because of technology growth. The aim of the article is to help the readers understand technology growth in health care and its impact on cost increment and productivity improvements in the health sector.
A demand-side model is developed to illustrate how the rising income levels can lead to an increase in health care costs. The assumption is that the model operates in a market with private insurance markets that are functioning well. The government has a role to finance the health care sector, and this leads to increased taxes in a bid to meet the health expenditure. In addition, the supply side of the model represents physician behavior. In this case, physicians are assumed to do everything in their power to provide quality health care to their patents irrespective of the financial, ethical, or resource constraints.
The article further notes that the Medicare prospective payment system should in the future provide incentives to come up with cost-saving technologies to reduce the expenditure. These incentives are yet to be seen but i