Sample Essay

To what extent is your organizations financial health affected by the Fed’s policy on money and interest rates? What aspects of Fed actions affect your organization the most?

As KBR is a large organization with billions of dollars and thousands of employees working in various states, it is similar to other large corporations in the fact that it is affected to a larger extent than smaller companies are affected.

If the Fed follows a contractionary monetary policy and reduces the supply of money from the market, the price of money, that is the interest rates increases according to the natural theory of demand and supply. If supply decreases, as in the case above, the interest rates are pushed up and it becomes more expensive to borrow money. This means that investments will decrease as people take fewer loans. Growth in the economy decreases and as a result, inflation decreases and unemployment figures increase.

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