Answer to Question #123895 in Macroeconomics for Aniket Kakria

Question

5) In the US, people who are going to be central bankers have to be approved by the US Congress (Congress is like Parliament in Canada). Recently, someone was applying to be a US central banker and an American politician named Alexandria Ocasia Cortes asked pointed out that inflation was the same for the last couple years even though the unemployment rate fell from 5.5% to 3.9%. Then she asked if that meant the US central bank had made a mistake and kept interest rates too high. Why did she think the central bank kept interest rates too high?

Answer 1

This because when interest rates are too high the demand for banking service providers increases there by more banks in the economy and thus the reduction of the unemployment rate where else the inflation rate stayed the same for a while due to inertial delay.