Emma Tyler, Chapter 10, Question #2

In Chapter 10 of Naked Economics, Wheelan describes the Federal Reserve and their responsibilities. The main job of the Federal Reserve is to control "the money supply and therefore the credit tap for the economy" (219). Preventing inflation or deflation is a very important job the Federal Reserve has, and I learned that inflation/deflation is an important issue that, if present in our economy, could affect my life. Wheelan uses the extreme example of terrible inflation in Germany after the first World War. Wheelan writes that "In 1921, a German newspaper cost roughly a third of a mark; two years later, a newspaper cost 70 million marks" (231). If inflation was happening in the US today I would be directly affected at the age I am right now, and if inflation occured when I was older. Inflation has the power to completely put an economy in shambles and it could lead to a downward spiral of events that would also be harmful (things like unemployment). Reading this chapter made me understand that the Federal Reserve plays a very important role in our daily lives, though we may not notice.