Some critics of the Federal Reserve argue that central bankers manipulate the market whenever they adjust interest rates. For example, in an article in the Wall Street Journal, monetary economist Judy Shelton writes, "When the Fed tightens by raising interest rates, its goal is to increase borrowing costs." She contends that the Fed's approach ...

Restoring timeless principles of economics within the academy will strengthen public discourse. When gasoline is expensive, people grumble that big oil companies like Chevron and ExxonMobil are colluding to keep prices high. They're wrong. The best way to understand why businesses aren't collectively fleecing consumers can be found in ...

One sign is that banks are calling in loans without extending new ones. Ramesh Ponnuru thinks that monetary policy isn't tight enough yet. He worries, based on recent data on current-dollar GDP, that we are continuing in a persistently loose monetary environment. That means future economic pain is all but certain, whether in the form ...

Economists use aggregate demand and aggregate supply (AS-AD model) to understand how inflation and real income growth are jointly determined. The four components of the model are: Aggregate demand (AD): gM + gV = gP + gY.Nominal expenditures growth (gM + gV) equals nominal income growth (gP + gY). Long-run aggregate supply (LRAS): gY = ...

There is no inflation-unemployment tradeoff. Unemployment last month reached an historic low, but inflation remains at a 40-year high. The Federal Reserve’s mandate requires it to pursue both full employment and price stability. Fed officials are now scrambling to get a handle on inflation. However, commentators are worried monetary ...

Financial-markets commentators and policy-makers should do the same. Inflation took center stage at the recent confirmation hearing for Federal Reserve chairman Jerome Powell. “High inflation is a severe threat to the achievement of maximum employment,” Powell told members of the Senate Banking Committee. “To get the kind of very strong ...