People often speculate about whether the Federal Reserve will raise the interest rate or keep it where it is. The Federal Reserve is charged with the responsibility of keeping the U.S. economy on track, and it has the power to raise and lower the interest rate as well as create money. That’s just what it did in response to the financial crisis of 2008—it created three trillion dollars to prop the economy up. Now that the economy has more or less recovered, all that money poses a threat. Listen to this story to find out why and to learn what the Federal Reserve intends to do about it.
Story Length: 3:29
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The United States economy has experienced slow but steady growth since the 2007-2009 recession. Historically, one result of an improving economy should be an increase in the overall level of prices – inflation. This has not been the case, however, and inflation has stayed low. Inflation has remained low in part because most people don’t worry about it rising, and they aren’t rushing to buy products before they go up in price. Listen to this story from Planet Money and hear what low inflation sounds like, and how your behavior can directly affect whether prices rise or fall.
What should the government spend its money on? With a growing national debt this has become an important question. Economists see the government’s role in providing goods and services to be one that fills a need. The government should pay for things that make our lives better but that the private market cannot or will not provide. Listen to this story from Planet Money to learn the reasons why government has decided to pay for public goods such as lighthouses and autopsies.
The Federal Reserve System is the central bank of the United States. It is responsible for the effective operation of the U.S. economy and conducts the nation’s monetary policy, stabilizes prices and moderates interest rates, and promotes the safety of individual financial institutions. In 1907, J. P. Morgan organized other leading financiers to backstop a run on banks and bring an end to a nationwide financial crisis. Later, with the encouragement of a powerful senator, a group of New York bankers went on to develop a plan for a central bank that was eventually adopted and that is still in effect today. Listen to the story to learn more about the formation of the Federal Reserve and America’s central banks by Congress.
Food banks distribute billions of pounds of food each year throughout the United States to hungry children and adults. The Feeding America network is the nation’s largest organization working to end hunger. But it had a problem. The food banks were receiving large donations of food, but not necessarily the kinds of foods they needed. For example, one center received lots of pickles, but not enough produce. To solve this problem the Feeding America network created a market economy in order to distribute food among it’s food banks. Using fake money, the food banks created a market that assures better allocation of food across the distribution centers. Listen to the story to learn more about how market economics solved their allocation problem.
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