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-Hypothetical situation: A couple of years ago, the Federal Reserve expressed concerns that the economy was...

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Finance

-Hypothetical situation: A couple of years ago, the FederalReserve expressed concerns that the economy was heating up. Thefear was that this would initiate inflationary pressure. To keepthis from happening too rapidly, they began raising interest rates.They raised the Fed funds rate four times during 2018.

Theoretically, what should be the impact on the economy and thestock market?

Has this been the reaction we have seen from the market? Why orwhy not?

Answer & Explanation Solved by verified expert
4.0 Ratings (664 Votes)
Theoretically the impact on economy when the interest rates are increased by the Federal Reserve is that the economy starts slowing down The slowdown is not immediate but happens gradually after several months usually after 12 months from the    See Answer
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