Why does the Fed increase or decrease interest rates Why doe

Why does the Fed increase or decrease interest rates? Why does it buy or sell bonds? Do you think it is important for the Fed to be independent? Why or why not?

Solution

Fed increse or decrease the interest rate to control the aggregate demand in the economy with the target to maintain Inflation levels which is the key objective of the Fed.

It buy or sell bonds to lncrease or decrease money supply in the economy with the intention to control the price levels and provide money for the consumption and investment and vice versa.

Yes Fed should be independent because they serve very important purpose to control prices while if its not independent than political forces might result in against its objective.

the above is answer..