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| The Federal Reserve is responsible for monetary policy. The following Web site discusses the Federal Reserve in action and how it implements monetary policy. http://www.frbsf.org/publications/federalreserve/monetary/tools.html Also visit the Web sites, http://www.econedlink.org/lessons/index.cfm?lesson=EM220, and http://www.federalreserve.gov/boarddocs/press/monetary/2006/20060131/default.htm The first article is a case study of the Federal Reserve System and Monetary Policy, December 2005. It discusses the decision of the Federal Reserve (Federal Open Market Committee) to raise its target for the federal funds rate. The article discusses the Fed's goals, tools, the Beige Book, and how it came to this policy decision. The second article is a Federal Reserve Press Release that discusses the Fed's action on December 13, 2005 to raise its target federal funds rate by 25 basis points to 4-1/2 percent. This was the twelfth increase since June 2004. Part I. What are the Federal Reserve current observations and concerns? Part II. What tool will the Federal Reserve use to accomplish its goals? Part III. If the Federal Reserve were to become concerned about a slowing of the economic expansion, what is it likely to do with its open market operations and the federal funds rate? Part IV. How do changes in monetary policy affect your family's spending and business spending in the economy? |