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In late 2017, the U.S. government passed a large tax cut. At that time, the unemployment rate was about 4%. During 2018, the US president
In late 2017, the U.S. government passed a large tax cut. At that time, the unemployment rate was about 4%.
During 2018, the US president pressured the Fed to reduce interest rates.
a) In terms of the IS-LM curve, what was the president trying to achieve with his monetary policy "advice"?
b) Why might the Fed have believed that not reducing interest rates (or not reducing them as much as the president
wished) was an appropriate policy? Explain your answer in the context of IS-LM, AD/AS, and/or the Phillips curve.
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