Question
Jerome Powell is the head of the Federal Reserve. For the purposes of this question, you can assume that Europe is the only other economy.
Jerome Powell is the head of the Federal Reserve. For the purposes of this question, you can assume that Europe is the only other economy. Jeromes goal is to keep U.S inflation at zero. He controls the money supply. Given his goal of controlling inflation how should he change the money supply in response to the following events? Be as precise as you can.
a. U.S income increases by ten percent.
b. Uncertainty about Covid raises the U.S demand for money by twenty percent.
c. Europe has inflation of ten percent.
d. President Biden runs a federal budget deficit of ten percent of GDP.
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