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4-2 Discussion: Monetary System Available on Jan 21, 2023 11:59 PM.Submission restricted before availability starts.Subscribe

The Federal Reserve controls the money supply through monetary policy actions.

In your initial post address the following:

• How do changes to the federal funds rate affect the unemployment rate? Explain by using information from the textbook.
• How do changes to the federal funds rate affect the inflation rate? Explain the relationship using information from the textbook.

This video willould help to explain the Monetary Policy and the Fed- EconMovies #9: Despicable MeMonetary Policy and the Fed:EconMovies #9: Despicable Me.

In your responses, comment on at least two posts from your peers. Compare and contrast your thoughts about monetary policies. Research current levels of the federal funds rate, inflation, and unemployment and make recommendations on monetary policy actions that would help maintain economic stability.

In your responses, comment on at least two posts from your peers. Compare and contrast your thoughts about monetary policies. Research current levels of the federal funds rate, inflation, and unemployment and make recommendations on monetary policy actions that would help maintain economic stability.

1. When federal funds rate increase so does the unemployment rate. When these rates increase there is less money being lent out by banks, therefore businesses don't have money to be investing back into their company which could cause them to go out of business. This is when we see an increase in unemployment rates.

When there are changes to the federal funds rate there is a change in the inflation rate. When the Fed decreases the money supply that is given out this causes the interests rates to go up. This happens because there is a decrease in spending by consumers. When an expansionary monetary policy is used it can allow to fight inflation because the fed is able to increase the money supply given out.

2. When businesses and your everyday citizens see an increase in the interest rate in the economy, they began to spend less money. With the decrease in expenditures, it causes a decrease in the economy's money flow and creates an increase in unemployment. When interest rates go down it easier to borrow money and households are more likely to buy goods and services. Businesses will be able to hire more people with more income.