Asked by Victor lemus corsicana tx
Define monetary policy and its role in the great depression in short.
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Monetary policy is the set of actions a central bank uses to control the money supply and interest rates to achieve goals like price stability and full employment.
In the Great Depression the U.S. Federal Reserve tightened monetary conditions instead of easing them: the money supply fell sharply (roughly a third from 1929–33), many banks failed, and severe deflation and rising real interest rates followed. That contraction of credit and purchasing power greatly deepened and prolonged the downturn by reducing spending, investment, and employment; economists such as Friedman and Schwartz identify it as a primary cause of the Depression, compounded by the constraints of the gold standard.
In the Great Depression the U.S. Federal Reserve tightened monetary conditions instead of easing them: the money supply fell sharply (roughly a third from 1929–33), many banks failed, and severe deflation and rising real interest rates followed. That contraction of credit and purchasing power greatly deepened and prolonged the downturn by reducing spending, investment, and employment; economists such as Friedman and Schwartz identify it as a primary cause of the Depression, compounded by the constraints of the gold standard.
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