Please answer the second and third questions. Anything helps:) To those who are willing to help, thank you so much. Please provide as detailed an answer as possible:?

Consider the following viewpoint from Larry Summers in the Washington Post, 24 May, 2021. Full article available here. \"The covid-19 chapter in U.5. economic history is coming to a close more rapidly than almost anyone expected, including me. Within weeks, gross domestic product will reach a new peak, and it is likely to exceed its pre-covid trend line before year's end, as the economy enjoys its fastest year of growth in decades. Job openings are at record levels, and unemployment may well fall below 4 percent in the next 12 months. Wages and productivity growth are increasing. This is both very good news and a tribute to the aggressive covid-19 containment policies of recent months, as well as to strong fiscal and monetary policies since the onset of the pandemic. Our economy has outperformed those of other industrial countries. U.S. policymakers can take satisfaction from that. But new conditions require new approaches. Now, the primary risk to the U.$. economy is overheating and ination...... ...Fed and Biden administration oicials are entirely correct in pointing out that some of that inflation, such as last month's run-up in used-car prices, is transitory. But not everything we are seeing is likely to be temporary. A variety of factors suggests that inflation may yet accelerate including further price pressures as demand growth outstrips supply growth; rising materials costs and diminished inventories; higher home prices that have so far not been reflected at all in official price indexes; and the impact of inflation expectations on purchasing behavior. Higher minimum wages, strengthened unions, increased employee benefits and strengthened regulation are all desirable, but they, too, all push up business costs and prices. First, starting at the Fed, policymakers need to help contain ination expectations and reduce the risk of a major contractionary shock by explicitly recognizing that overheating, and not excessive slack, is the predominant near-term risk for the economy. Tightening is likely to be necessary, and it is critical to set the stage for that delicate process.\" Reserve, expressed in comments from Chair Jav Powell, that there is veryr little risk of long term inflationary pressure from the Fed's current policyr stance. An example of this viewpoint is here. (ii) Illustrate both viewpoints using the model of aggregate demand, ination and output gaps that we have studied in this course. (iii) Which view do you think has greater merit? Why? (Marks will not be allocated separatelv to points (i), (ii) and (iii). Rather an overall mark out of 10 will be given.) m |_ Federal Reserve Chairman Jerome Powell said Wednesday that the economy needs to improve more before the central bank will change its ultra-easy monetary policy. In remarks prepared for the House Financial Services Committee, the central bank chief noted improvements but said the labor market in particular is still well below where it was before the Covid-19 pandemic hit. Powell noted that the Fed's benchmark of \"substantial further progress\" toward full employment and stable prices remains \"a ways 0 .\" He did remark that Fed ofcials at least are talking about reducing the pace of asset purchases. On ination, Powell said it \"has increased notably and will likely remain elevated in coming months before moderating.\" But he stuck to his o-stated belief that the current surge is temporary and will be offset as conditions return to normal. He stressed that much of the current price pressure comes from a few industries such as used cars that are sensitive to temporary conditions. Multiple members of the House committee pressed him on the current ination trends. 'Tt's all kind of the same story. It's a shortage of semiconductors. There's also very high demand for various reasons,\" Powell said in response to a question from Rep. Madeleine Dean, RPa. \"It's just a perfect storm of high demand and low supply and it should pass. Unless we think there's gonna be a multiyear, many-year shortage of used cars in the United States, we should look at this as temporary. We very much think that it is.\" A question of 'progress' Pushed during the hearing to explain what \"substantial further progress\" will mean, Powell said that in regards to employment \"it's a very difcult thing to be precise about.\" \"It really is a very broad range of things,\" he added. He said the Fed \"will provide lots of notice\" before it considers tightening policy. Markets have been watching Fed communication for indications about when the central bankwill begin tapering its minimum $120 billion a month in bond purchases as it keeps interest rates anchored near zero. Powell noted that the two policy measures \"along with our strong guidance on interest rates and on our balance sheet, will ensure that monetary policy will continue to deliver powerful support to the economy until the recovery is complete.\" The chair's comments came as part of his mandated semiannual testimony to Congress on the state of monetary policy and the economy. As he has in the past, Powell noted that the pandemic-related hit to the economy is falling on those least able to shoulder it. \"Conditions in the labor market have conrmed to improve, but there is stilla long way to go,\" he said. \"Job gains should be strongin coming months as public health conditions continue to improve and as some of the other pandemic-related factors currently weighing them down diminish.\" While the unemployment rate has dropped to 5.9% from its pandemic high of 14.8%, the Fed is focused on an inclusive employment mandate across racial, gender and income groups. \"Despite substantial improvuents for all racial and ethnic groups, the hardest-hit groups still have the most ground le to regain,\" Powell said. 7 l