Compose a 200-300 word response to the following questions in a Microsoft Word file and submit your assignment below.
To counteract an economic contraction, the Federal Reserve (the Fed) often attempts to stimulate the economy by reducing interest rates. Describe the five-step process that starts with an increase in the money supply and ends with an increase in GDP.
To counteract inflation, the Fed often attempts to dampen economic growth by increasing interest rates. Describe the five-step process that starts with a decrease in the money supply and ends with a reduction in inflation and GDP.
What factors determine the effectiveness of this five-step process?