The FED (Central Bank in the USA) is watching the actions of the federal government and...
- The FED (Central Bank in the USA) is watching the actions of the federal government and believes that federal government spending will increase next quarter which will lead to future rates of inflation greater than 3 percent.
- Using the Money Supply Model explain how the FED will use its TOOLS and affect inflation. Define the key macro terms and the Money Supply Model in business friendly terms.
- Businesses are concerned about both inflation and higher interests. Explain why they are concerned about higher inflation and higher interest rates.
Homework Answers
Ans
2 Higher interest means cost of investment increases. Hence they can invest less which is concern for businessmen. It also decreases consumption and thus demand for their goods falls
Inflation raises the pro es of inputs like labour, steel etc that they use to produce goods. Hence it reduces their profits. It also introduces uncertainty in economy
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The FED (Central Bank in the USA) is watching the actions of
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