The Federal Reserve is responsible for managing the country's money supply. Monetary policy affects the whole economy through interest rates. When the Fed increases the money supply, interest rates drop. When the Fed decreases the money supply, interest rates increase.

Think about a recent purchase you made that required a loan, like a house. Explain how you arrived at the decision to purchase. Then explain how the interest rate on the loan affected your purchase. For instance, were you able to purchase a higher priced item because the interest rate was low?

Thinking deeper about your answers; how do interest rates affect millions of other buyers and their decisions, then how that affects the whole economy? Explain.