Directions: For each of the situations listed below, decide if the FED would use Easy-Money policy, Tight-Money policy, or do nothing.

1. We are in a recession (negative economic growth).
2. We are in a recession (negative economic growth).
3. Economic indicators show a strong move towards inflation.
4. Unemployment is 11 % while inflation has fallen from 8% to 2%.
5. Economic growth is steady, but prices are rising sharply.
6. Prices are stable, and the economy is growing at a 3% pace.
7. Economic growth decreased from 3% to 1% in the last year.
8. Inflation has risen 3% in the last six months.
9. The prices of cars (only cars) have tripled in the last year
10. The USA has both high inflation and high unemployment.
11. Unemployment is low and prices are rising at a slow and steady rate.

Directions: Decide if the FED would use Easy-Money or Tight-Money. Determine how the FED would use the specific tool of monetary policy

1. The FED is faced with high unemployment, how could they lower it using the reserve requirements?
2. The FED is faced with high inflation, how could they lower it using the discount rate?
3. The FED is faced with high unemployment, how could they lower it using open-market operations?
4. The FED is faced with high inflation, how could you lower it using open-market operations?
5. The FED is faced with high inflation, how could they lower it using the reserve requirements?
6. The FED is faced with high unemployment, how could you lower it using the discount rate?

1. What happens to the inflation rate if the Fed works to lower the unemployment rate?
2. What happens to the unemployment rate if the Fed works to lower the inflation rate?