Explore the Role of the Federal Reserve Bank" What is the FED's job and how does the FED manage the money supply? How do banks create money? Let’s explore these questions as we talk about the role of the Federal Reserve Bank, also known as the FED. Reply to these questions in your post: If the FED decides to continue the process of raising interest rates, what is the likely response of firms and households to the increased cost of borrowing? Thinking back to the discussion on the deficit and the debt, how might an increase in the interest rate affect a decision by the government to allow continued large deficits? Discuss with a peer: Reply to a peer and discuss if their reasoning about borrowing or allowing large deficits is similar to yours.