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FED's actions in stopping inflation

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The Economics in Practice describes the increase in food prices around the world in 2008. Since food, in large measure, affects the real income of households, increasing prices will eventually push up wages and have an impact on the aggregate supply curve. Central banks were very worried about the prospects for inflation becoming generalized. To stop inflation, what would the Fed be likely to do? What are the consequences for the economy? Specifically, what would be the effects on employment and unemployment given the actions taken by the Fed?

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This solution discusses actions that the FED is likely to do in order to stop inflation.

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In order to stop the inflation, the Fed is likely to increase the interest rate. By increasing the interest rate, individuals would have an incetive to keep money in the bank thereby reducing the amount of ...

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Edwin Sinclar, MBA
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  • MBA, Aspen University
  • Bachelor of Science , Berea College
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