Final answer:
The Federal Reserve during the Biden administration may continue forms of monetary policy such as quantitative easing or interest rate adjustments to support economic activity and restore confidence. Factors influencing these decisions include pandemic-related labor market challenges and a Keynesian approach to economic policy.
Step-by-step explanation:
The monetary policy pursued by the Federal Reserve during the Biden administration may involve a balance between continuing quantitative easing (QE) and managing interest rate levels to support economic activity and job creation.
Historically, the Federal Reserve has implemented QE by purchasing long-term government and private mortgage-backed securities, aiming to make credit more accessible and stimulate aggregate demand.
However, given that these measures are typically seen as temporary emergency tools, the Fed may look to taper these policies depending on the economic recovery and the ongoing impact of the pandemic.
President Biden's administration emphasizes a Keynesian perspective, focusing on restoring confidence and aggregate demand in the economy.
This approach suggests that the Federal Reserve could continue using accommodating policies to support Biden's economic objectives, especially with ongoing labor market challenges and public health concerns.
Understanding the Federal Reserve's decision-making process is complex. It involves choosing targets like interest rates or money growth rates to trigger adjustments in monetary policy. These decisions are largely contingent on prevailing economic conditions and the Fed's macroeconomic objectives.