Week 3 Discussion Questions Essay Example | Topics and Well Written Essays - 500 words - 3

Week 3 Discussion Questions - Essay Example For lenders, an adjustable rate mortgage is more beneficial if the current interest rates are high, because interest rates are likely to return to lower rates in the future. On the other hand, when interest rates are low, fixed mortgages are particularly advisable for home buyers as they have been in the past year. For example, the United States Federal Reserve in December 2008 slashed interest rates to their lowest level on record in an unprecedented attempt to combat a prolonged recession (Pykett, 2008). Hence, it is favourable for home buyers at this time to consider a fixed rate mortgage, as they are able to lock in to a favourable rate. I consider the Federal Reserve Bank an institution in a dilemma, because its goals frequently conflict. For example, should the monetary policy implemented by the Federal Reserve Bank give priority to price stability or to full employment? Although price stability can help achieve optimal sustainable output growth and employment over the longer term, a move to restrain inflation would further aggravate slowdown in the economy (Mankiw, 2003). On the other hand, a bid to combat unemployment would aggravate inflation. In such situations, the Federal Reserve Bank is in a dilemma and must determine whether to concentrate on battling increasing prices or on supporting the loss of employment and output. 3. Explain the impact current Federal Reserve Banks policy is having on your 1) personal decisions and 2) the decisions of your organization. Provide at least one example. (I work in the meat processing industry) The Federal Reserve Bank determines the federal funds rate at a level it believes will promote financial and monetary conditions consistent with attaining its monetary policy objectives, and it adjusts that goal in line with evolving economic conditions. An alteration in the