Macroeconomics Murray Monetary Policy 1. The Fed determines that the current rate of inflation is too high. Describe how the Fed could utilize open market operations to address this issue. Draw the resulting shifts in the graphs of LEFT: the market for money and RIGHT: AD-AS Maoney Supply Interest Rates Money Demand Quantity of Money 2. The Fed determines that the current rate of unemployment is too low. Describe how the Fed could utilize the reserve requirement to address this issue. Draw the resulting shifts in the graphs of LEFT: the market for money and RIGHT: AD-AS Money Supply Interest Rates Money Demand Quantity of Money Macroeconomics Murray 3. The Fed determines that the current rate of inflation is dangerously low. Describe how the Fed could utilize the discount rate to address this issue. Draw the resulting shift in the graphs of AD-AS Macroeconomics Murray 4. The economy has experienced the demand shock shown here: PL LRAS SRAS ADs Y. Ya rGDP (a) Suppose the central bank wants to correct this gap. What type of monetary policy should it enact? What is the appropriate open market operation? Explain. (b) Show the impact of the open market operation you chose on the money market. (c) Which curve in the AD-AS model would be impacted by this? How would it change? Explain. (d) Would this cause the price level to increase, decrease, or stay the same? Explain. (e) Would the unemployment rate increase, decrease, or stay the same? Explain