The majority of economists would admit that
money is powerful and that changes in money
will impact the economy. Monetary theory analyzes
and determines how changes in the supply
of money affect the economy.
This book details the collection of policies
that use monetary tools known as monetary
policy. For example, the main monetary authority
of a country is its central bank. In the United
States it is called the Federal Reserve Bank System
(Fed), which is a federation of 12 Federal
Reserve Banks. The Fed is responsible for initiating
printing of money, monitoring the interest
rate, and controlling the supply of money in
the economy. Monetary authorities are shielded
from executive branch interference by serving
14-year terms. This allows them to act without
worrying about political fallout or fear of losing
their jobs. The ability to work and function
independently from political pressure has been
used to claim that the supply of money is exogenous.
Inside this authoritative text, the author
gives real insight to the IS-LM Framework
(Investment Saving-Liquidity Preference Money
Supply) and the effects on our economy.