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Federal Reserve Policies

New data available to the Federal Reserve shows that the unemployment rate has risen to 7%. The Federal Funds rate is currently 5%.

a. The Federal Reserve is considering whether to raise the Federal Funds rate to 6%, lower it to 4%, or leave it at 5%. What do you suggest? Carefully describe.

b. Based on your answer to part a above would you suggest the Federal Reserve, buy bonds, sell bonds, not buy or sell bonds? Carefully describe.

c. Using the AD/AS model what do you predict will happen to the level of Real GDP and the Price level in the U.S. in the Short-Run and Long-Run? Carefully describe (a graph would help).

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M924546

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