The Federal Reserve may raise its benchmark interest rate later this month. How is this achieved?...
The Federal Reserve may raise its benchmark interest rate later this month. How is this achieved? Why would they do this? Explain the consequences fully. (Include graphs with your answer)
Homework Answers
The fed can raise by selling securities in open market,or by raising the required reserve ratios.One of the reasons for raising the interest rate is controlling Inflation.High interest rate consequently reduces aggregate demand and hence the price level.
The money supply falls and Ms(money supply curve) and LM curve shifts to the left.Interest rate rises and income falls.As a result the aggregate demand falls and price falls.
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The Federal Reserve may raise its benchmark interest rate later
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