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Given current economic conditions, the Federal Reserve has been aggressively raising interest rates. Answer the following questions regarding this policy: Which Interest Rate does the
- Given current economic conditions, the Federal Reserve has been aggressively raising interest rates. Answer the following questions regarding this policy:
- Which Interest Rate does the Fed target when it raises rates? (5 points)
- Explain the process by which the Fed raises rates. (Which policy tool are they utilizing, and how does that tool work in practice?) (10 points)
- What impact does a tight (high) interest rate policy have on the money supply? (5 points)
- What economic variables are the main drivers of monetary policy (i.e. what is the dual mandate for the Federal Reserve)? (10 points)
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