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- Why can’t the Fed automatically maintain full employment and low inflation?Explain The FED's inflation TargetWhich of the following are reasons why the Fed targets an inflation rate greater than 0%? Inflation enables the labor market to function more smoothly. enables the Fed to more effectively fight recessions. helps avoid the risk of deflation. at 0% keeps the purchasing power of consumers stable.
- If the Fed indicates that inflation is likely to be a concern in the near future, the public would expect that it might Lower interest rates at its next meeting Not change interest rates at its next meeting Raise interest rates at its next meeting Lower interest rates before its next meeting Decrease the federal budget deficit at its next meetingAn economy is currently experiencing inflation that exceeds the target rate set by the central bank. Explain the process in full detail by which the central bank can bring the inflation rate down.In March and April 1980, inflation in the United States peaked at 14.6 percent. What did then-Fed chairman Volcker elect to do? What was the impact of his policy?
- An economy is currently experiencing inflation that exceeds the target rate set by the central bank. Identify and explain costs to an economy that are associated with inflation.If the Fed has announced that it plans on increasing the interest rate it willWhy can’t the Fed target both the money supply and the interest rate at the same time?