Jamie picks up Wanda from the mall. When Wanda gets into the car, Jamie has the radio tuned to a public radio station. When Wanda reaches to change the station, Jamie stops her, explaining that she is listening to a report about a meeting of the Federal Reserve earlier that day. The reporter is talking about how the Federal Reserve is considering a potential increase in interest rates. Several economists are giving their opinions regarding the announcement. When the segment ends, Jamie changes the station. After thinking about what she has heard, Wanda asks Jamie, “Why do you and I care what the Federal Reserve does?” What are the possible impacts that increases/decreases in interest rates and the tightening/loosening of the money supply might have on Salty Pawz? How might such decisions affect Wanda personally and as a business owner? Do you believe the decisions made by the Federal Reserve affect you? Why or why not?
Functions of the Federal Reserve System
The Federal Reserve System looks after the financial activities and operations of the banking system. It is the apex body that has complete control over the banking regulations. All the guidelines regarding the banking system, money supply, and formulation of the monetary policy come under the purview of the Federal Reserve System. The New York Fed also helps in drafting the monetary policy and supervising the financial system.
Elastic and Inelastic Markets
Measuring the change in percentage of an economic variable with respect to change in a different economic variable is known as elasticity. This change in percentage results in a change in price concerning changes in other factors. In simple terms, when one factor brings a change to another factor, it is called elasticity.
Jamie picks up Wanda from the mall. When Wanda gets into the car, Jamie has the radio tuned to a public radio station. When Wanda reaches to change the station, Jamie stops her, explaining that she is listening to a report about a meeting of the Federal Reserve earlier that day. The reporter is talking about how the Federal Reserve is considering a potential increase in interest rates. Several economists are giving their opinions regarding the announcement. When the segment ends, Jamie changes the station. After thinking about what she has heard, Wanda asks Jamie, “Why do you and I care what the Federal Reserve does?”
What are the possible impacts that increases/decreases in interest rates and the tightening/loosening of the money supply might have on Salty Pawz? How might such decisions affect Wanda personally and as a business owner? Do you believe the decisions made by the Federal Reserve affect you? Why or why not?
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