Money and Interest Rates

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

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

"A borrower's guide to forecasting interest rates" Retrieved May 17, 2010.
http://moneycentral.msn.com/content/Investing/Realestate/P39219.asp

Economic Focus: "What goes around", The Economist, Retrieved May 17, 2010.
http://proquest.umi.com/pqdweb?did=1284761571&sid=1&Fmt=3&clientId=29440&RQT=309&VName=PQD&cfc=1

Chan, Sewell (2010) "Fed Study Suggest..." The New York Times, Retrieved August 27, 2010.
http://www.nytimes.com/2010/06/15/business/economy/15fed.html?_r=1&scp=38&sq=&st=nyt

Read the above articles and write a 4 page paper that address each of the following questions:

1. What are the primary economic indicators that you would use if you were thinking about making a large purchase and needed a loan? For example, you may consider a new house, car, or new capital for a business?

2. According to the background material, what are the primary tools used by the Federal Reserve System to change money supply?

3. In August, the government released reports that the economic growth in the second quarter is equal to an annual rate of 1.6 percent, which was slower than expected. What can the Federal Reserve do to increase economic growth. Be sure to mention specific policies.

4. Read the Chan article. How does this article influence your decision to make a purchase that requires a loan?