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Part 1 - Check Your Understanding - Use the graph below of the federal funds rate to answer th following questions . The vertical gray
Part 1 - Check Your Understanding - Use the graph below of the federal funds rate to answer th following questions . The vertical gray bars on the graph represent recessions FRED - Effective Federal Funds Rate 17.5 15.0 12.5 10.0 Percent 7.5 5.0 2.5 1960 1970 1980 1990 2000 2010 1. According to the graph , what happens to the 3. Identify a range of years when the Federal federal funds rate when there is a recession ? Reserve most likely used expansionary monetary policy - Explain your reasoning 2. Identify a range of years when the Federal 4. How does a lower federal funds rate impact Reserve most likely sold the most government output , unemployment , and price level in the bonds . Explain your reasoning short run ? 5. After analyzing the graph above , your friend assumes that a decrease in the federal funds rate causes a recession . Explain why that assumption is incorrect 6. The Federal Reserve does not directly set the federal funds rate . How does the Federal Open Market Committee (FOMC ) ensure that the federal funds rate falls within their target range
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