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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

  1. Given current economic conditions, the Federal Reserve has been aggressively raising interest rates. Answer the following questions regarding this policy:
    1. Which Interest Rate does the Fed target when it raises rates? (5 points)
    2. 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)
    3. What impact does a tight (high) interest rate policy have on the money supply? (5 points)
    4. 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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