The Federal Reserve uses monetary tools to regulate the money supply and maintain growth and stability in the U.S. economy. One way the Federal Reserve regulates the money supply is by adjusting interest rates. Adjusting interest rates can have a variety of impacts on the economy. Below is a list of different effects that might be seen when the interest rate is changed. For each effect, decide if this was caused by increasing or decreasing interest rates.(6 points)
Economic effects Caused by Increasing Interest Rates Caused by Decreasing Interest Rates
a Consumers are spending more on goods
b People are now paying more for car loans
c Business investment is on the rise
d Inflation has increased
e GDP growth has slowed down
f People have started to buy more houses
Economic effects Caused by Increasing Interest Rates Caused by Decreasing Interest Rates
a Consumers are spending more on goods Decreasing interest rates
b People are now paying more for car loans Increasing interest rates
c Business investment is on the rise Decreasing interest rates
d Inflation has increased Decreasing interest rates
e GDP growth has slowed down Increasing interest rates
f People have started to buy more houses Decreasing interest rates