How Can Monetary Policies Be Used to Assist the Elderly?

In an economy, economists face difficult decisions when dealing with the retired population. A retired population within an economy acts with much differently than a working population. The working population depends on income in order to build assets and be able to buy goods and services in their life. But, by the time a member of the working population chooses to retire, they depend completely on the assets they’ve built during their working lifetime in order to support their livelihood. However, one of those assets is generally a large nest egg saving deposited in a bank. That means that these investments are reliant upon the interest rates imposed by the banks to allow them to grow. By incorporating monetary policies, a government can protect these savings for the retired population in the community. A monetary policy represents a policy that adjusts the interest in the economy. By raising interest rates, the government can effectively protect the savings of the elderly by assuring their assets grow steadily on an annual basis. This works because as the interest rate increases, the saving grows by a larger percentage annually.

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2 Responses to How Can Monetary Policies Be Used to Assist the Elderly?

  1. Peter Anthony says:

    A couple of points:
    Millions of the elderly rely on Social Security as they were too poor to have a nest egg.
    What will an increase in interest rates to do AD and employment? If you provoke a recession that will also impact the elderly.

  2. 12congwi says:

    The millions of retired reliant on Social Security are those who we are targeting for help given the cost-push inflation.
    An increase in interest rates will draw the AD back. This will invoke a recession and lead to deflation, causing the elderly to receive less from their Social Security. As AD drops, a rise in unemployment occurs due to a drop in total productivity and real GDP in the economy drops as well.

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