Some members of Congress have proposed a law that would make price stability the sole goal of
Question:
Some members of Congress have proposed a law that would make price stability the sole goal of monetary policy. Suppose such a law were passed.
a. How would the Fed respond to an event that contracted aggregate demand?
b. How would the Fed respond to an event that caused an adverse shift in short-run aggregate supply? In each case, is there another monetary policy that would lead to greater stability in output?
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a If there were a contraction in aggregate demand the Fed would need to increase th...View the full answer
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