In the graph you've just explored, if the Fed lowers the federal funds rate target range to 1.75 to 2.00 percent and conducts QE of $1 trillion, has the Fed done too little, too much, or got it just right to achieve full employment?A. Just rightB. Too muchC. Too little Quantitative easing(trillions of dollars)Federal fundsrate target range(percent per year)3.00to2.75Real GDP andprice levelReservesOPrice level (GDP price index, 2012 = 100)11611411211010910810610418.4Recessionarygap19.2 19.6 20.0PotentialGDPAD₁ADOAS20.821.6Real GDP (trillions of 2012 dollars) Quantitative easing(trillions of dollars)0Federal fundsrate target range(percent per year)2.00to1.75Real GDP andprice levelReservesOPrice level (GDP price index, 2012 = 100)11611411211010910810610418.4Recessionarygap19.2 19.6 20.0PotentialGDPAD₁ADAS20.821.6Real GDP (trillions of 2012 dollars)

The statement above suggests that a government intervenes in the time of recession to bring a…

Answered: n the graph you've just explored, if…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

In the graph you've just explored, if the Fed lowers the federal funds rate target range to 1.75 to 2.00 percent and conducts QE of $1 trillion, has the Fed done too little, too much, or got it just right to achieve full employment?

A. Just right

B. Too much

C. Too little

Quantitative easing
(trillions of dollars)
Federal funds
rate target range
(percent per year)
3.00
to
2.75
Real GDP and
price level
Reserves
O
Price level (GDP price index, 2012 = 100)
116
114
112
110
109
108
106
104
18.4
Recessionary
gap
19.2 19.6 20.0
Potential
GDP
AD₁
ADO
AS
20.8
21.6
Real GDP (trillions of 2012 dollars)

Quantitative easing
(trillions of dollars)
0
Federal funds
rate target range
(percent per year)
2.00
to
1.75
Real GDP and
price level
Reserves
O
Price level (GDP price index, 2012 = 100)
116
114
112
110
109
108
106
104
18.4
Recessionary
gap
19.2 19.6 20.0
Potential
GDP
AD₁
AD
AS
20.8
21.6
Real GDP (trillions of 2012 dollars)

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