Assume the economy in the United States has an unemployment rate of 4.6% and that rate has been stable for the last 7 months. The GDP is $14.6 trillion up from $13.9 trillion one year ago. The rate of inflation is 4.4% and has been rising for the last 9 months. M-1 is 1.6 trillion. The Natural Rate of Unemployment in the economy is 4.5%

1. Assuming the Federal Reserve decides to act and engage in a monetary policy. Explain which policy approach is most appropriate? (Easy Money Policy or Tight Money Policy)

2. Which of the three monetary tools will the Federal Reserve use to carry out their policy? Be sure to explain how that tool would work and why it is the most appropriate tool.

3. Based on the Policy you selected in Question 1 and the tool you selected to address that problem in Question 2, are the Inflation Problem, Policy, and Tool(s) consistent with the current situation in the United States?