AnneOnCollege.net

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About Me...

In June 2007 I decided to look into returning to school for my Bachelor's degree. I had been managing okay with my Associate's degree, but the idea of moving back home [South Florida] without more education under my belt was not so appealing. By the end of July I had started my first class. Two years later I am five classes away from completing that degree and my oldest child is about to start her college journey. View my complete profile

About This Blog...

With this blog I hope to share some of what I have learned through my experiences as an online student and now, mom of a college student. Here you will find great scholarships, student deals, and other information to help with your voyage into higher education. Happy Studying!

What I Learned Wednesday - No Quick Fixes

Join the fun, post what you learned this week, and link up below. The code for the image is located in my sidebar. All I ask is you link back to this post. Oh, and make sure you link to your post and not your blog in general, okay?

The final week of my Money and Banking class was about economic factors and the interest rate target. Not unlike our current predicament, the example mentioned a slumping economy, high unemployment, and the threat of inflation on the horizon. We were to decipher this information and decide whether the target interest rate should be lowered or raised. Here is my response:

This reminds me of a level. We move it a little up and then a little down trying to get the bubble to be in just the right spot, to be level. When the economy slumps the central bank steps in and makes its adjustments in an attempt to inch up the economy. The problem with making an economic adjustment is that the effect of today’s adjustment will not be fully felt for up to twelve months. This [is discussed on page 448 and] is called the transmission lag. So, unlike our level where we see an immediate fix, any change inflicted by the central bank will take some time and will need to consider its future effect.

Inflation is generally thought of as a dirty word, but inflation on a smaller scale can be a good thing. The central bank should look at lowering the nominal interest rate to foster economic growth, stimulate employment, and be mindful of this as the threat of inflation looms on the horizon. The goal is that leveling effect with minor adjustments to correct the balance.
While this was not completely foreign to me, it does clarify a lot. As much as we would like for everything to be all better with a little bailout here and a lot of bailout there it does not seem to work quite that simply. Furthermore, if we make too sharp of an adjustment we will be forever trying to find balance, but actually become more and more unbalanced.

What have you learned this week? Grab the button from my sidebar, then add a link to your post below using MckLinky. Not sure how to link up? Leave a comment or send me an email (or both) and I will happily walk you through it.



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