Question:
Suppose that the Federal Reserve acts to lower interest rates. How this will affect the U.S. economy?
After the economic slowdown that started around the third quarter of 2000, the Fed lowered interest rates eleven times in the following year, 2001. What concerns would have about the effort by the Fed to smooth out this economic recession?
In contrarily, suppose that the Fed unexpectedly increases the rate of money growth. What are the effect on short-term and long-term interest rates, and why those effects are different.