What Does The Inflation Rate Indicate?

Plz help macro question inflation real gdp and interest rate?

• what is the Effect of changing the federal funds rate (interest rate) on inflation and real GDP growth? I know that GDP (Y) and inflation are positively related (if Y increases so does inflation) and I know that interest rate is negatively related to inflation but what would be the effect of increasing or dec the federal funds rate? did i get it right please help

• Answer:

  Iin general, increased fed fund rate makes the borrowing for banks more costly. therefore it causes and upward presure on other market interest rates as well. as a consequence housholds lower the borrowing due to increased interest rates. Therefore level of consumption decreases and inflation may decrease. As increased interest rates negatively affect on the borrowing my investors, invesment may also fall. thereby GDP may fall. However, as the inflation also falls, the real GDP may remain unchanged.