Directions: For each of the following activities, indicate if it is an expansionary
policy, contractionary policy or not a Fed operation.
Inflation, Disinflation or Deflation?
Directions: For each of the following statements, indicate if the economy is experiencing
inflation, deflation or disinflation.
For each of the following actions, indicate which Federal Reserve tool is being described.
Discussion Board Topic: The Fed's Tools
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
- 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 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."
In this section we have described the roles of the Federal Reserve Banks and the
Federal Open Market Committee in monetary policy. The dual mandate describes the Fed's economic goals of price stability and maximum employment.
Achieving these goals requires using monetary policy to influence the money supply,
interest rates and economic growth. While the monetary policy function of the
Fed is the task that gets the most attention, the Federal Reserve System has
many other roles that are addressed in the final section of this course.