How do the federal funds rate, inflation, and the unemployment rate all relate to each other? How does the Fed's monetary policy affect you in your daily life? Be specific.
The relationships among federal funds rates, inflation and unemployment are a little complicated, especially where the latter, unemployment, is concerned. Federal funds rate is a subset of monetary policy, so is distinct from inflation and unemployment. Briefly, monetary policy refers to the process by which the nation’s central bank, the Federal Reserve, and its governing body, the Board of Governors, operating through its Federal Open Market Committee, dictates interest rates in an effort at minimizing the rate of inflation without adversely affecting the ability of businesses to borrow the financing necessary to expand operations and remain competitive. The Federal funds rate is a component of monetary policy that determines the rates at which banks can borrow money from the Federal Reserve System and determines the rate that banks charge each other when transferring cash among themselves.
As noted, a primary objective of monetary policy has historically been controlling...
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