About a potential increase in interest rates

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Reference no: EM13831876

Assume that you are the manager of a firm. You are concerned about a potential increase in interest rates because it would reduce the demand for your products. Currently, economic growth is high, but annual inflation has increased from 3 percent to 5 percent within the last six months. The unemployment rate is very low and cannot go higher. The Federal Reserve (Fed) is meeting next week to assess economic conditions and set monetary policy. A. Given the current economic situation, should the Fed adjust or not adjust economic policy? If so, how? If not, why? B. Recently, the Fed has allowed the money supply to expand beyond its long-term target range. Does this affect your expectation of what the Fed will decide at its upcoming meeting? 3/. Suppose the Fed has just learned that the Treasury will need to borrow a larger amount of funds than originally expected. Explain how this information may affect the degree to which the Fed changes the monetary policy.

Reference no: EM13831876

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