Question

How does the Fed affect monetary policy

Answer 1

The point of implementing policy through raising or lowering interest rates is to affect people's and firms' demand for goods and services. This section discusses how policy actions affect real interest rates, which in turn affect demand and ultimately output, employment, and inflation.Feb 6, 2004

Answer 2

Answer and Explanation:

The Fed affects monetary policy in order to grow the economy or keep it on a high level of growth, achieve high levels of employment, and ensure there is stability in the wages of citizens and prices of goods which can help to create, sustain or promote a strong economy: the Fed affects monetary policy by trading securities, regulating the amount of money for discount rates, and also the amount of money supplied in bank reserves and open markets; these activities end up affecting (positively or negatively) federal fund rates or lending rates which banks borrow and use for many financial operations. Depending on how these activities are controlled, the Fed can actually keep inflation under control, or lose control over it.