Fed Raises Rates as Job Gains, Firming Inflation Stoke Confidence

The U.S. Federal Reserve raised interest rates on Wednesday. The rate rise was the second in three months. This second rise comes in an economy that is growing faster and creating jobs at a more rapid pace. These gains are accompanied by a rising inflation rate.

Source:Reuters, March 15, 2017

a.Describe the process by which the Fed's action reported in the news clip flows through the economy.

b.Draw a graph to illustrate the state of the economy that prompted the Fed to take the action described in the news clip.

c.Draw a graph to illustrate the Fed's action and its effect.