Monetary Policy Assignment

When the economy gets into serious problems, the government has two policies that offer the potential to get us back to equilibrium. Fiscal Policy works through government spending and taxes, while Monetary Policy works through the money supply. Read each scenario below and decide what the correct monetary policy would be to correct the issue.

1. You read the following information on the economy. The economy has fallen into a recession. Use this information to do three things below:

A. What is the corrective monetary policy? (All 3 tools) (Discount rate, required reserve rate, open market operations)

B. What, if any, problems might be encountered as a result of the above actions?

2. You read the following information on the economy. Demand-pull inflation has increased across the U.S. Use this information to do three things below:

A. What is the corrective monetary policy? (All 3 tools) (Discount rate, required reserve rate, open market operations)

B. What, if any, problems might be encountered as a result of the above actions?