The recent monetary policy response in the US to a positive shock Consider the recent monetary policy response in the world's largest economy, the United States It has become evident that the Federal Reserve is serious about reducing the annual rate of inflation which was 8 2 in September of 2022 Raising the US cash rate quite sharply can be an effective tool at reducing inflation, but this has implications for other advanced economies such as Australia as pointed out in the followingarticles(listed in chronological order) Pupazzoni, Rachel (2022) 'TheAussie dollar is dropping against the US currency, but it's not all bad news', ABC News , October 5th, available https www abc net au news 2022 10 05 usd aud exchange rate 101492848 Smialek, Jeanna (2022) 'Inflation IsUnrelenting, Bad News for the Fed and White House', New York Times , October 14th, available https www nytimes com 2022 10 13 business economy high inflation html Free access, see Reading List on ECON1000 Blackboard site Comment on the changes in the Australian dollar as the Reserve Bank of Australia (RBA) has followed suit in raising, albeit not as aggressively as the US, its own cash rate In your answer, provide some data for both countries of the change in the cash rate and the exchange rate (expressed in AUD terms) for two points in time late March 2022 and late October 2022 Use the multiplier AD model and Phillips curve diagram to illustrate and explain in detail how the aggregate demand function in the US economy is expected to shift in a year from now as the Federal Reserve aims to keep long term inflationary expectations low In your answer, elaborate in words (no additional figure required) on the different ways in which US households (more vs less credit constrained) are expected to respond to such contractionary monetary policy

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The recent monetary policy response in the US to a positive shock Consider the recent monetary policy response in the world's largest economy, the United

The recent monetary policy response in the US to a positive shock

Consider the recent monetary policy response in the world's largest economy, the United States. It has become evident that the Federal Reserve is serious about reducing the annual rate of inflation which was 8.2% in September of 2022. Raising the US cash rate quite sharply can be an effective tool at reducing inflation, but this has implications for other advanced economies such as Australia - as pointed out in the followingarticles(listed in chronological order):

Pupazzoni, Rachel (2022) 'TheAussie dollar is dropping against the US currency, but it's not all bad news', ABC News, October 5th, available:https://www.abc.net.au/news/2022-10-05/usd-aud-exchange-rate/101492848
Smialek, Jeanna (2022) 'Inflation IsUnrelenting, Bad News for the Fed and White House', New York Times, October 14th, available:https://www.nytimes.com/2022/10/13/business/economy/high-inflation.html [Free access, see Reading List on ECON1000 Blackboard site]

Comment on the changes in the Australian dollar as the Reserve Bank of Australia (RBA) has followed suit in raising, albeit not as aggressively as the US, its own cash rate. In your answer, provide some data for both countries of the change in the cash rate and the exchange rate (expressed in AUD terms) for two points in time: late-March 2022 and late-October 2022.
Use the multiplier AD model and Phillips curve diagram to illustrate and explain in detail how the aggregate demand function in the US economy is expected to shift in a year from now as the Federal Reserve aims to keep long-term inflationary expectations low. In your answer, elaborate in words (no additional figure required) on the different ways in which US households (more vs. less credit-constrained) are expected to respond to such contractionary monetary policy.