Changes in Federal Reserve policy

Money and interest rates are important to individuals and businesses making decisions to finance purchases. The following articles assess conditions for finance purchases and important aspects of monetary policy.

Tom Woodruff has written an interesting and to-the-point article, "A borrower's guide to forecasting interest rates" about effects of the Federal Reserve's monetary policy and changes in interest rates.

1. Assume a friend you know needs a loan to make a large purchase (e.g. buying a new car, some business equipment, or a house). What major economic indicators would you suggest they examine?

2. describe how the Federal Reserve's policy-makers influence interest rates including in your answer the difference between expansionary and contractionary policies.

3. How could changes in Federal Reserve policy affect your friend's decision to use financing to make a purchase?