Question 5 (20 points): a. (5 points) Explain why the Federal Reserve did not decrease money supply more aggressively to curb the ongoing inflation? b. (10 points) Assume that you are a member of the Federal Open Market Committee (FOMC). There is a forecast that a recession is likely to come soon. A recession means that economic activities would slow down. (i) What actions would you suggest the Federal Reserve to take to address the recession? Remember to be specific about the action that the Federal Reserve would do. (ii) Explain how these actions would affect the interest rate, investment, and employment? Assist your explanation with a graph of money supply-demand. c. Since 1800, globalization has risen substantially (see graph). Value of exported goods as share of GDP, 1827 to 2014 Explain: (i) Why trade has become increasingly more important. (ii) What factors drove the rise of ON export/import. 1060 1800 1800 1820 1940 1800 2014