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Directions: For each of the situations listed below, decide if the FED would use Easy-Money policy, Tight-Money policy, or do nothing . We are in
Directions: For each of the situations listed below, decide if the FED would use Easy-Money policy, Tight-Money policy, or do nothing.
- We are in a recession (negative economic growth).
- We are in a recession (negative economic growth).
- Economic indicators show a strong move towards inflation.
- Unemployment is 11 % while inflation has fallen from 8% to 2%.
- Economic growth is steady, but prices are rising sharply.
- Prices are stable, and the economy is growing at a 3% pace.
- Economic growth decreased from 3% to 1% in the last year.
- Inflation has risen 3% in the last six months.
- The prices of cars (only cars) have tripled in the last year
- The USA has both high inflation and high unemployment.
- 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
- The FED is faced with high unemployment, how could they lower it using the reserve requirements?
- The FED is faced with high inflation, how could they lower it using the discount rate?
- The FED is faced with high unemployment, how could they lower it using open-market operations?
- The FED is faced with high inflation, how could you lower it using open-market operations?
- The FED is faced with high inflation, how could they lower it using the reserve requirements?
- The FED is faced with high unemployment, how could you lower it using the discount rate?
- What happens to the inflation rate if the Fed works to lower the unemployment rate?
- What happens to the unemployment rate if the Fed works to lower the inflation rate?
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