Economic Effects of Government Policy

This research explores the economic effects of government policies in the United States. As it is not feasible to consider in this paper the economic effects of all the myriad policies of government in the United States, the economic effects of such policies in three areas are considered. These areas are (1) policies of the Board of Governors of the Federal Reserve System, (2) the policies incorporated into the Americans With Disabilities Act, and (3) environmental protection policies.

Economic Effects of Policies Initiated by the Board of Governors of the Federal Reserve System

The policy mandate of the Board of governors of the Federal Reserve System includes the maintenance of maximum employment, economic stability, economic growth, stability in prices, and the seeking of moderate levels in long-term interest rates. Within the agency's policy mandate, the Board of Governors establishes specific goals. The emphasis placed on the various elements of the policy mandate by the Board assumes great importance to the nation in an economic context (Board of Governors, Federal Reserve System, 1996).

The President of the Federal Reserve Bank of Richmond in the mid-1980s, Robert Black, stated that "an excessive preoccupation with current conditions can lead to policy actions that destabilize the economy rather than stabilize it" (Black, 1984, p. 5). Black (1984) was promoting a long-range policy objective approach for the

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se. An increase in the discount (interest) rate will (in theory) have the opposite effect on the money supply aggregate. An increase in reserve requirements directly restricts the money supply aggregate, while a decrease in the reserve requirements for member banks acts directly to expand the money supply aggregate (Meltzer, 1998). It is evident that each of the monetary tools available to the Federal Reserve System may have impacts in the economy other than those for which they are intended. All of the monetary tools are highly interrelated. An increase in the money supply aggregate which is too rapid, as an example, in theory will create an increase in the rate of inflation in the economy. A decline in the money supply aggregate, or an increase which is too slow, may cause the economy to enter into a recession ("National Financial Markets," 1996). With respect to United States Treasury debt, the Federal Reserve participates only in the refinancing, or roll over, of existing debt. The Federal Reserve System does not purchase cash debt instruments from the Treasury (Board of Governors, Federal Reserve System, 1996). If the Federal Reserve System were to purchase cash debt instruments issued by the Treasury, it would permi
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Approximate Word count = 3451
Approximate Pages = 14 (250 words per page)

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