Question

The Federal Reserve board of governors has power to raise or lower short-term interest rates. Between 2005 and 2006, the fed aggressively increased the benchmark federal funds interest rate from 2.5 percent in February 2005 to 2.5 percent in June 2006. Assuming that other interest rates also increased, what effects do you think that move had on investments spending in the economy? Explain your answer. What do you think the Fed's objective was?