n your responses, to your peers. Compare and contrast your thoughts about monetary policies. Research current levels of the federal funds rate, inflation, and unemployment and make recommendations on monetary policy actions that would help maintain economic stability. ( cite work and with reference (apa) listed

My post:

How do changes to the federal funds rate affect the unemployment rate?

In our text, the federal funds rate is described as the short-term interest rate that banks charge one another for loans. (Mankiw, 2021) This rate is affected by the market's supply and demand for loans. The Federal funds can manipulate this rate through open market activities. Federal funds inject reserves into the financial system by purchasing bonds in open market operations, which reduces the need for banks to borrow, lowering the federal funds rate. Because the financial system is so interconnected, when the federal funds rate changes, other interest rates typically follow suit. (Mankiw, 2021) Interest rate changes, whether higher or lower, influence the money supply. As interest rates increase, households will borrow less money for spending. When purchasing is down, there is less desire for manufacturing. When output falls, so does the desire for workers. Unemployment rises when the demand for workers declines. When loan rates are low, the opposite happens. Lower interest rates increase a family's buying power. When purchasing increases, so does manufacturing demand. When production increases, so does the desire for workers, lowering unemployment.

How do changes to the federal funds rate affect the inflation rate?

Inflation is defined in our text as an increase in the overall level of prices in the market. (Mankiw, 2021) Most interest rates, as previously stated, are closely linked to the federal funds rate. And the rise and decline of interest rates affect the money supply, which in turn affects prices. When the money quantity expands, the value of money falls, which causes prices to rise. When costs rise, inflation rises as well. In comparison, when the money supply is reduced, the value of money rises and prices fall. When costs fall, so does inflation. All of this is linked to the quantity theory of money, which claims that the amount of money available determines the price level and that the rate of growth in the amount of money available determines the inflation rate. (Mankiw, 2021)

Reference :

Mankiw, N. G. (2021).Principles of Economics. Cengage Learning.

My Peers Post:

How do changes to the federal funds rate affect the unemployment rate?

The Federal Reserve was formed, like other central banks, to promote economic success and social welfare. They are responsible for making sure that prices do not go up or go down too quickly. The federal rate undergoes changes which have a dramatic effect on determining unemployment rates. The federal funds rate is defined in our text as the short-term interest rate that banks charge each other for loans. This rate is influenced by the supply and demand for loans in the market and gives the Fed's power to manipulate the rate using open market operations. When the Fed's injects reserves into the banking system by buying bonds in open market operations, the need for banks to borrow is reduced which lowers the federal funds rate. Parts of the financial system are so closely connected that when the federal funds rate changes it causes other interest rates to change in the same direction. The change in interest rates, whether higher or lower, will affect the money supply. High interest rates will cause a reduction in households borrowing money for purchases and when purchasing is less, there is less need for production. When production is lowered, there is less need for workers and when the need for workers is reduced, unemployment rises. The opposite happens when interest rates are lower. For instance, when interest rates are lower a household's buying power is increased and when purchasing increases, the need for production increases. Also, when production increases the need for workers increases, which in turn lowers unemployment. (Mankiw, 2021)

How do changes to the federal funds rate affect the inflation rate?

The Federal Reserve was formed the same way as other central banks to promote economic success and social welfare. When prices are too high they make adjustments to monetary policy to raise interest rates in order to slow the amount of money in the market. When the supply of money in the market is very high it increases demand and thus raises prices because the output of those products and services doesn't change. Two percent (2%) per year is what the Federal Reserve considers to be an appropriate level rate of inflation as measured by a specific price index called the price index for personal consumption expenditures. The Federal Reserve attempts to keep inflation under control by manipulating interest rates. When inflation becomes too high, the Federal Reserve hikes interest rates to slow the economy and the amount of money being injected into the market which will then reduce prices to try and get the economy back to a point of equilibrium. When inflation is too low, the Federal Reserve reduces interest rates in order to stimulate the economy, increase the amount of available money, and raise inflation. (Mankiw, 2021)

Reference

Mankiw, N. G. (2021). Principles of microeconomics (#9 edition). Cengage.

Edelberg, W. (2021, November 16). What Does Current Inflation Tell Us About the Future? Brookings. Retrieved March 23, 2023, https://www.brookings.edu/blog/up-front/2021/11/16/what-does-current-inflation-tell-us-about-the-future/

US Department of Labor & Statistics. (2023, March). The employment situation - U.S. bureau of labor statistics. Retrieved March 23, 2023, from https://www.bls.gov/news.release/pdf/empsit.pdf