Explain what the effect will be on quantity and price.

1.       One goal of the Federal Reserve is controlling inflation. Which of the following policy actions are likely to help the Fed meet that goal?  a) Cutting the fed funds rate to zero. b) Setting an inflation target of 2 percent. c) Raising the interest rate on reserves. d) Making a large loan to a big financial institution that is about to fail. e) Raising the discount rate

2.       Suppose the Fed raises the fed funds rate. For each of the following markets, explain what the effect will be on quantity and price.  a) Cars. b) Homes. c) Purchases of clothing using a credit card.

Solution:

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