Final Project Milestone Three: Monetary Policies – PowerPoint Presentation

Final Project Milestone Three: Monetary Policies

ECO 202

Monetary Policy

The Special Credit Restraint Program (SCRP) had been introduced in 1980. Interest rates and real GDP growth were both extremely volatile in in the early 1980’s.Paul Volcker monetary policy helped reduce inflation rates and bring economic growth back to the nation.

Monetary Policy Actions

The SCRP had made new requirements for banks to meet in order to meet reserve requirements. Discounts rates were also raised, and banks were required to hold loan growth to a certain rate. Extending consumer credit was highly discouraged.The Fed was using Contractionary monetary policy early in the 1980’s.Paul Volcker’s Monetary policy of raising interest rates slowed down inflation.

Fig 1: Federal Funds rate compared to inflation

Monetary Policy Impact

The Monetary policies set into play starting in October 1979 took control of M1 growth and recovered an economy that was in a nose dive.M1 Growth saw a declining rate from 1980 through 1982 and then continuing throughout the decade.The Perseverance of The Federal Reserve Chairman saw inflation rates fall as well as unemployment rates through the early 1980’s.


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