Education: A Better Tomorrow

Monetary Policy and Interest Rates

Among other things that influence interest rates, monetary policy is also one of them. Democratic governments use two policy tools to help their economies thrive. There is the fiscal policy and monetary policy.

First, let us discuss the difference of fiscal policy to monetary policy. Fiscal policy pertains to the power of the government with congresses or parliament’s consent to increase or decrease tax rates. To increase tax rates, would mean to take away the disposable income of civilians. Think of it this way, the economy is a wheel. The movement of money makes the wheel turn. When people spend less money, the economy turns slowly. So the government increases taxation. The extra money the government collects is then spent on projects that will pour money back into companies for government mandated projects. These companies in turn will give them back to the people by employing more employees or by paying their existing ones with more. Such spending is also known as “pump-priming” activities.

Another instrument of fiscal policy would be for the government to borrow money for its expenditures. They do this so as not to over tax their citizens and provoke protest actions against their management. However, borrowing is not always an option. Lenders do not easily part with their funds. The general economic environment is placed into consideration.

Uncertainty and monetary policy rules in the United States

“Uncertainty is not just an important feature of the monetary policy landscape; it is the defining characteristic of that landscape” (Greenspan 2003).

Uncertainty is a central issue in monetary policy, as the quote from Alan Greenspan above illustrates. Empirical models, however, rarely take account of this, effectively assuming that policymakers ignore uncertainty. The evident focus of policymakers on uncertainty suggests that this assumption is invalid and therefore that empirical models of monetary policy must account for uncertainty. This article considers the effects of uncertainty about the true state of the economy on monetary policy, estimating a monetary policy rule that allows for this.

Our empirical model combines elements of Svensson’s (1997) model of inflation forecast targeting with models drawn from the theoretical literature on optimal monetary policy when there is uncertainty about the true state of the economy, most prominently Svensson and Woodford (2003, 2004) and Swanson (2004). In existing models of monetary policy under certainty, monetary policy affects inflation and the output gap directly, so it is optimal for policymakers to use these variables in forming monetary policy. This is the basis for the Taylor rule (Taylor 1993) model of monetary policy and its subsequent refinements (e.g., Woodford 2003).

Education – University Degree

With the escalating cost of higher education, many people have begun to question the value of pursuing a college degree. The struggle to earn a living and attain valuable knowledge to increase future earning potential is a dilemma for many folks. However, research has revealed that the rate of return on the investment to earn a university degree for both the individual and society over the long run is over 118% on average.

According to the U.S. Census Bureau, the holder of a university degree can earn over one million dollars in extra income over the course of their lifetime. One million dollars is a significant sum of money considering the cost involved in investing in a university degree ( On average US $35,196). Knowing that a person who holds a university degree may earn one million dollars more in their lifetime supports the concept that higher education is a worthwhile investment. There are many other verifiable reasons to support going to college to earn a university degree, such as:

Education: A Better Tomorrow

Monetary Policy and Interest Rates

Related posts

Uncertainty and monetary policy rules in the United States

Related posts