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The country of Sarkovia is in a recession and the Central Bank of Sarkovia uses monetary policy to help the economy recover. a. What are
The country of Sarkovia is in a recession and the Central Bank of Sarkovia uses monetary policy to help the economy recover. a. What are the short-run effects of the Central Bank's action on interest rates, prices and output? b. What are the long-run effects of the Central Bank's action on interest rates, prices and output? 2. Use the money market graph to show how the following events affect interest rates and quantity of money: a. The Fed engages in in an open-market purchase of US Treasury bills. b. The holiday shopping season arrives. c. Inflation rises. d. The Feb raises the discount rate 3. What may cause a bank failure and why is a bank failure bad for the economy? 4. The current interest rates in the US are very low, at about 0.5%. If a recession hits, briefly state what policy options the US government has to respond to this? 5. The unemployment rate is lower than the NAIRU. Please explain what the FED should do in this situation and explain what would happen in the short and long-run
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