3. "Inflation is much too high and we understand the hardship it is causing. We're moving expeditiously to bring it back down," Fed Chairman Jerome Powell said during a news conference. (Source: CNBC.com) Given the above statement, suggest a policy which can be implemented by the Fed to address the inflationary pressure. Assume that the Fed were to adopt required reserve ratio, using AD-AS model, explain the outcomes of this move on the economy in the short run. (You may exclude LRAS curve in your model)

3. "Inflation is much too high and we understand the hardship it is causing. We're moving expeditiously to bring it back down," Fed Chairman Jerome Powell said during a news conference. (Source: CNBC.com) Given the above statement, suggest a policy which can be implemented by the Fed to address the inflationary pressure. Assume that the Fed were to adopt required reserve ratio, using AD-AS model, explain the outcomes of this move on the economy in the short run. (You may exclude LRAS curve in your model)

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter14: Money And The Economy

Section: Chapter Questions

Problem 3WNG

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Similar questions

Consider the classical AS-AD model with misperceptions. Assume that the economy is initially at its general equilibrium. Now, suppose the central bank considers an increase in the nominal money supply that is not anticipated by households or firms.
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Above is a graphical model of the AS-AD. In this model the initial level of the economy is at the low output and low inflation. Describe what happens to the economy when the Central Bank decides to lower interest rate and most likely this will lead to an increase in money supply thereafter. a. What happens to the aggregate demand? b. What happens to the level of output? c. What happens to the price level? d. Effect of the monetary policy made by the Central Bank?
Refer to the diagram to the right. Suppose the economy is in a recession and the Fed pursues an expansionary monetary policy. Using the static AD- AS model, this would be depicted as a movement from OA. C to B. OB. C to D. OC. B to C. OD. A to B. OE. A to E. Price leve A LRAS B D E C Real GDP AD ₁ SRAS AD 3 AD 2
Do you think continued inflation is a demand-side phenomenon or a supply-side phenomenon? Use diagram to explain
How do you know if the Fed's actions achieve the goal of stable prices? The goal of stable prices is achieved when _______. A. the prices of food, clothing, and shelter are stable B. the PCEPI inflation rate excluding food and energy prices is 2 percent a year C. the general level of prices is changing, but we can accurately predict the rate of change D. the inflation rate is zero percent a year
4. "It is not the continued shift of the SRAS curve that causes continued inflation". Explain this statement. You may use a diagram for your explanation.
Suppose that the economy is depicted in the graph. Using the 3-point curved line drawing tool, depict the scenario in which the economy experiences cost-push inflation by correctly shifting the short-run aggregate supply curve. Label it 'SRAS,'. Carefully follow the instructions above, and only draw the required objects. 4
24. Firas a university student, trying to convince his colleague Bilal that the aggregate demand only shifts upward and the main reason is the change in prices: * Firas is almost right since the AD can O shift downwards and the price change is the main factor causing the shift Firas is wrong because the AD can shift both up and down although the prices do not cause a shift in AD Firas is wrong since the AD can shift O both ways and the price can cause the shift. Firas is right since the AD only shifts upwards and the price is the initial factor behind the shift 25. While looking at an economic cycle
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