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The Economic Perspective: “Controlling the Punch Bowl”

I’m Mary Walden, with economist MW, welcoming you to the economic perspective.  Today’s program looks at controlling the punch bowl.  Mike, when you and I were teenagers, punch bowls at parties were often controlled by adults.  The adults’ job was to make sure there wasn’t too much “punch” in the drinks.  Sometimes if the party got too wild, the adults would remove the punch bowl.  Some say the Federal Reserve controls the punch bowl for the economy.  Please explain this.  I can’t wait!

  • Actually easy – interest rates are the punch in the punch bowl
  • Want to get the party – the economy – going – lower rates
  • Makes it easier to borrow and spend
  • Want to slow the party – raise interest rates
  • Makes it harder to borrow and spend
  • Last five years Fed took the punch bowl away – raised rates
  • Now the opposite – lowering rates
  • I’m MW

And I’m Mary Walden for the Economic Perspective, an NC State Extension program from the Department of Agricultural and Resource Economics.