How Does The Federal Reserve Affect The Economy

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The Federal Reserve promotes, effectively, the goals of maximum employment, stable prices, stable prices, and moderate long-term rates (Hubbard and O’Brien 478-479). They continue to increase interest rates in hopes that the economy will keep improving. It is said that the increase of interest rates have made unemployment levels decrease while wages have increased. This has created a sign of confidence that the economy is continuing to grow stronger because of the positive outlook. Concerns about low inflation are one reason the Federal Reserve continues to raise interest rates. They are confident that the increasing of interest rates will strengthen inflation as the economy grows while also making sure it does this without going above the …show more content…
There are many factors that can shift the money demand curve to right when increasing and to the left when decreasing. The Fed’s policy change can also affect the aggregate demand and aggregate supply. The change of Fed’s policy can be a positive impact or negative impact on inflation, the GDP, and unemployment. Inflation is changing right along with the Federal Reserve’s policy for the better and the worse. With the change occurring, inflation has continued to remain low which the Federal Reserve regards as healthy but concerning (Russell). Although it is deemed healthy for the economy, the Federal Reserve wants to see some movement as long as it stays below the maximum so that the economy doesn’t overheat. The unemployment rate has been at it lowest since the Fed’s policy has changed, adding 196,000 jobs a month since 2015 (Russell). This is great for the economy since one of the monetary policy goals is high employment. Real GDP has been at its potential since the change creating a positive impact on the economy. In my opinion, I believe that the Federal Reserve should continue raising interest rates because it has had a positive impact on the