Question

Use current inflation and unemployment statistics to argue either for or against intervention in the economy by the Federal Reserve?

Answer 1

Unemployment and inflation data for the US economy are encouraging. The unemployment rate is the lowest since 1969, 3.7% in September 2018 according to data from the US Department of Labor. This can be considered full employment, a concept that suggests that some unemployment is natural and frictional, represented by people moving or not looking for a job in a hurry.

Phillips's Law that suggests that there is an inverse relationship between inflation and unemployment does not seem to reflect the US economy at the moment. Inflation is controlled, around 2% as expected by the Federal Reserve.

In this scenario, it can be said that market mechanisms are acting in the US economy optimally. It is the government's responsibility to ensure that the economic environment remains business-friendly without direct intervention, unless inflation is above the target, which is not the case at first.

Answer 2

The Federal Reserve System, often referred to as the Federal Reserve or simply "the Fed," is the central bank of the United States. It was created by the Congress to provide the nation with a safer, more flexible, and more stable monetary and financial system.