Question

Explain why the Federal Reserve Bank might be concerned if the economy begins growing too quickly.

Answer 1

Answer:

To check against high inflation rate

Explanation:

Inflation is the steady increase in the prices of goods and services in the economy per period. Inflation is associated with economic growth. Naturally, as the economy grows, the prices of different products and services tend to increase.

When the economy is growing at a fast rate, the inflation rate tends to increase.  A rise in the inflation rate means prices are increasing at a high rate. When prices are unstable, planning and budgeting become challenging for individuals, firms, and the government. Inflation erodes the strength of a currency, which causes unstable prices and other economic challenges. The Federal Reserve keeps monitoring inflation and applies appropriate monetary policies to regulate economic growth and the inflation rate.