1. The Fed wishes to expand the money supply. What three things can it do?
2. Explain why did the Fed switch from increasing rates prior to 2007 to reducing interest rates in 2007 and 2008?
3. Suppose that oil prices hit an all-time high of $200 a barrel, driving U.S. inflation up to 7 percent per year. At the same time, weak U.S. growth and increasing foreign competition have generated unacceptably high levels of unemployment in the United States. You are the chair of the Federal Reserve. What do you suggest?