III. Assume in a rare moment of political unity, the President and the Congress and the Federal Reserve all agree that the number one problem in the U.S. economy is inflation.

What is the proper course of action for the President and the Congress?

(List two actions they should take)

a.

b.

What is the proper course of action for the Federal Reserve?

(List any two actions they should take)

a.

b.

The news media almost always misleads when they describe Federal Reserve Action. They use statements like "Today the Fed. increased the interest rate by..." The Fed. cannot directly move the interest rate. Instead, they enter the bond market. Exactly how does that cause the interest rate to move?