What change in the target interest rate would you make


Problem: Visit the Federal Reserve Web site. Review the categories of information available and read the most recent FOMC statement, now suppose you are a member of the Board of Governors of the Federal Reserve System and the economy is experiencing a 8.3 percent inflation rate. Unemployment is at the full-employment level and the target interest rate is currently 3.00-3.25 percent. What change in the target interest rate would you make? How would this change get implemented? What impact would those implementation actions have on the lending ability of the banking system, the real interest rate, investment spending, aggregate demand, and inflation?

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