I posted this Question earlier two time but got copied answer and that answer wa
ID: 1138273 • Letter: I
Question
I posted this Question earlier two time but got copied answer and that answer was wrong also. Please answer accurately and dont copy paste
I need short answer for each part and please dont copy paste from online. Short answer like 4-5 senetncefor each part will be fine
4. The Federal Reserve chair always looks at the employment number before altering the federal funds rate. Raising the federal funds rate is equivalent to raising the price of capital. (2 pts)
a. Explain how raising the federal funds rate could have a negative impact on employment in the long run? Be sure to use the words scale and/or substitution effect in your answer.
b.Could raising the federal fund rate increase employment in the long run? (Be sure to use the formula from class/your text.) Be sure to use the words scale and/or substitution effect in your answer.
c. What effect would raising the federal fund rate have on employment in the short run
Explanation / Answer
a)Effect of raising federal rate on employment is a bit complicated to understand because it is not directly linked.Federal rate always affect labour market indirectly.Increase in Federal rate means that there is a chance of expensive business loans from the part of companies and in that case they will not expand their companies or will not hire labours.Again the credit card debt will be more expensive and will impact the personal finances.
c)In short run also raising federal fund rate will have a negative effect on employment.When there is higher interest rate the cost of borrowing will also be high which will ultimately result in low investment cost of investment via bank loan will be high.When there is less investments means it will hamper employment.Raising federal bank rate will hamper job growth due to low investment.