1. 1. Which interest rate does the Federal Reserve actually set during its policy meetings? What is the current level of this interest rate?
2. 2. When did Federal Reserve chair Janet Yellen say an interest rate increase may be coming, if at all? What are three improvements in the U.S. economy that she wants to see before deciding on increasing interest rates?
3. 3. What are two possible impediments that could convince the Federal Reserve to keep interest rate at their current levels in the coming months?
4. 4. Briefly explain how Federal Reserve’s raising of interest rates would affect the following variables: household consumption, private savings, business investment, economic output, and the inflation rate. Be sure to explain the reasons why these variables would be affected. Include a well-labeled figure to show the effects on economic output and price levels.
5. 5. Which U.S. industries would be the most hurt by rising interest rates, and why?