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 by responding to their post only:
The Federal Reserve also known as the “Fed” is the central banking system of the U.S. that manages, regulates and supervises the money supply for financial institutions. If the FED decides to continue the process of raising interest rates, it will become harder for indviduals and businesses to borrow money and/or pay it back. As interest rates continue to rise that debt just adds to the deficit.