The role of the Federal Reserve as the central bank and its mission to stabilize the economy

Assume the economy is entering a recession. The Federal Reserve is faced with the task of trying to stabilize the economy with the tools at its disposal. Unemployment has increased from 5 percent to 9 percent. Inflation has decreased from 4 percent to 1 percent. Gross Domestic Product has decreased in the past two consecutive quarters from (-1) percent to (-1.5) percent, which has caused a contraction in output. Consumer confidence has dropped from eighty-five on the Michigan Consumer Sentiment Index to sixty-seven.

You have read the following two headlines in the news (these are fictional headlines but you might use them in goggle to find real articles);

Market turmoil turns all eyes toward Fed

Economists see dramatic Fed action unless economy improves

The research paper must:

Explain the role of the Federal Reserve as the central bank and its mission to stabilize the economy,

Describe the economic indicators the Federal Reserve System will analyze as a basis for its decisions,

Describe which monetary policies the Federal Reserve might use to influence the money supply.

Explain the strengths and weaknesses of using monetary policy in comparison to fiscal policy and;

Analyze the effect of the Federal Reserve’s action on the world financial markets.