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- When the United States economy goes through a period of extended growth, the economy is said to be heating up! Unemployment is low and companies are increasing workers’ wages above the national minimum wage. The Federal Reserve (FED) is concerned that these wage increases will result in inflation; higher prices throughout the economy. What can the FED do?1) when the fed realises that inflation is going up at an unstable rate for the economy , which of the following are they most likely do ? (a) print more money (b) increase the discount rate (c) lover the reserve ratioQuestion 1 a. Increasing prices erode the purchasing power of the dollar. It is interesting to compute what goods would have cost at some point in the past after adjusting for inflation. Go to the Federal Reserve Bank of St. Louis, FRED database website at https://research.stlouisfed.org/fred2/and find the consumer price index for all urban consumers. What would a car that cost $25,000 today have cost the year 1996? b. Many countries have central banks that are responsible for their nation’s monetary policy. Go to www.bis.org/cbanks.htm and select one of the central banks (for example, ECB, Norway). Review that bank’s Web site to determine its policies regarding application of monetary policy. How does this bank’s policies compare to those of the U.S. central bank?
- Question 6 Homework Unanswered Suppose real GDP is growing at a rate of 3%, and money supply is growing at 6%. What is the inflation rate in percentage terms? Write the number without the percentage symbol. Type your numeric answer and submit OKnowing how the Federal Reserve works, why do people say the FED pumps money into the economy and cause inflation?a) Identify the four major tools of monetary policy. b) How can monetary policy address the problem of inflation?
- 1. What were the factors that led to the adoption of modern monetary and fiscal policies? 2. Why was the US economy so disinflationary and deflationary in the 1800s? 3. What prompted the creation of the Federal Reserve System?If an economy is operating at full employment and there is a substantial increase in the money supply, which of the following is most likely to happen? A. Inflation increases B. Interest rates increase C. Real GDP increases D. Unemployment increasesHow does inflation affect the purchasing power of money, and what are some common causes of inflation in an economy?
- What is the likely effect on inflation when a central bank increases the money supply rapidly? A. Inflation will decrease. B. Inflation will remain stable. C. Inflation will increase. D. Inflation will first decrease, then increase.4. You have the assignment of making a recommendation to the Chairman of the Fed during a period of persistent, high inflation. What could you do to restore stable prices?Please select ONE of the following questions as your discussion topic and respond with a paragraph or two that directly answers the question AND makes reference to class materials. For full credit, you must also respond to the posts of at least two of your classmates. 1. The Federal Reserve Board has enormous power over people's lives with its power to set and influence policy that determines monetary policy in the United States. Do you think this is proper for a democracy to provide the FED with so such power? How is the FED held accountable?
