Some countries have knowledgeable such high inflation rates that their money came to be worthless. Imagine going to the store with boxes complete of money and not gift able come buy anything with it due to the fact that prices have obtained so high! At such high inflation rates, the economic situation tends to break down.

The commonwealth Reserve, choose other main banks, was created to foster financial prosperity and social welfare. Component of the mission provided to the commonwealth Reserve by congress is to keep prices stable–that is, to store prices from rising or falling too quickly. The commonwealth Reserve watch a rate of inflation the 2 percent every year–as measure by a particular price index, referred to as the price index for an individual consumption expenditures–as the appropriate amount of inflation.

The commonwealth Reserve seeks to control inflation by influencing interest rates. Once inflation is too high, the commonwealth Reserve typically raises interest rates to slow the economy and bring inflation down. Once inflation is too low, the federal Reserve generally lowers interest prices to wake up the economy and also move inflation higher.




You are watching: If inflation begins to rise rapidly, which step is the federal reserve likely to take?

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Watch to discover out around all the commonwealth Reserve"s responsibilities and why it demands to keep inflation under control. 9 minutes


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