The Federal Reserve System has been given a dual mandate – it must pursue the economic goals of price stability and maximum employment. Explain how the Federal Reserve System might use its three tools in the following situations:
- The economy is growing quickly, so quickly that the rate of inflation has been rising every month for a year. People are uncertain about the future.
- The economy has been in decline and the unemployment rate is starting to rise. Economists are starting to use the "r" word – recession – in their economic forecasts.
Record your summary by clicking on the discussion board and responding to the thread titled "The Fed's Tools."