Question

Using outside sources, find evidence of the Federal Reserve’s effect on the economy. In a short paragraph, describe when and how the Federal Reserve has affected the economy, citing specific textual examples to support your ideas. To ensure your sources are reputable, follow these guidelines when searching: The author of the source should be clear. The author should have expertise in the field the person is writing on. For instance, if you are reading a source on an environmental issue, the author should have research experience with the topic. The source should be academic, meaning it is published by a respected site or source in the field of study (e.g. official government or university Web sites, academic journals, or reputable news sources). The source should not state opinions as facts. The source should clearly cite its sources and should not include dated information. In a second short paragraph, explain why your source is reputable. Explain how it fits into the guidelines above. Don’t forget to cite the source you have used.

Answer 1

The Federal Reserve's effect on the economy is visible when the interests rate target are maintained and the money flow is adjusted as needed to keep the rate at the desired level.

Varying the supply of reserves and changing the Federal Funds rate, the Fed can raise or lower interest rates in the economy. If it wants to stimulate the economy, it lowers interest rates to make loans cheaper. This encourages financial business investments and consumption. If it wants to slow the economy, raises interest rates.

This is explained in an Cbc article, written by Mark Thoma, who is a macroeconomist and econometrician at the University of Oregon. He specialises on finding out how monetary policy affects the economy. He also blogs daily at Economist's View.