Economics

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The Gross Domestic Policy runs linear with the business cycle. Hubbard and O’Brien (2010), mention that:

If the Fed is to be successful in offsetting the effects of the business cycle, it needs to be able to quickly recognize the need for a change in monetary policy. If the Fed is late in recognizing that a recession has begun or that the inflation rate is increasing, it may not be able to implement a new policy soon enough to do much good. In fact, if the Fed implements a policy too late, it may actually destabilize the economy (p. 871).

Therefore, when the there is a rise in a country’s gross domestic product there is an expansion in that country’s business cycle and when there is a decline in a country’s gross domestic product then that country’s business cycle goes into a recession like it is in our country right now.

There are several government bodies that determine national fiscal policies to keep a balance of trade which plays a large part in keeping a country’s financials stable. These bodies and agencies deal with tax and interest rates and government spending to control the economy. Answering to the Congress, the Federal Reserve regulates the supply of money, which helps control and keeps down inflation. According to Hubbard and O’Brien (2010):

In 1913, Congress passed the Federal Reserve Act, creating the Federal Reserve System (“the Fed”). The main responsibility of the Fed was to make discount loans to banks to prevent the bank panics. As a result of the Great Depression of the 1930s, Congress amended the Federal Reserve Act to give the Federal Reserve’s Board of Governors broader responsibility to act “so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates” (p. 860).

In doing so, the Federal Reserve aids in creating a much more financially stable nation overall. Alongside the Federal Reserve, which deals with the monetary policy of the nation, the Internal Revenue...