Question: 2. This is an essay problem requiring three graphs and three paragraphs. If appropriate, only Monetary Policy will be used. Consider the situation the economy

2. This is an essay problem requiring three graphs and three paragraphs. If appropriate, only Monetary Policy will be used. Consider the situation the economy is facing: Events of the Past 18 Months: Total spending has been increasing and has shown no signs of stopping. Production levels have risen up to full employmentr'full production levels and have apparently reached capacity, along with very low unemployment rates. Price levels have been rising like crazy and have shown no signs of stopping, with the rate of ination at 8%. Currently Interest rates are high and are very responsive to changes in the M1 money supply. Leading Indicator Data Vendor delivery performance has slowed down by 2 days due to Vendors having so many orders to fill The Dow Jones Industrial Average has passed 23,000 after rising for the past 30 days, and stock indices have risen as well. New housing starts, building permit applications and orders for new durable goods, and nished capital resources have experienced large increases during the past year. Consumers, and business ownerstEOs, are becoming worried about a serious problem with ination. Demonstrate what has happened during the past 18 months on an ADIAS graph. Construct an leMD graph based on current interest rate information. Write a paragraph explaining what is happening and determine if there is a problem in the economy. If there is a problem, clearly state what it is. Consider the Leading Indicator Information and determine what it predicts about changes in total spending. In a paragraph, analyze each of them, what the majority predicts and determine if Monetary Policy should be used, stating why or why not. If Monetary Policy is appropriate at this time, recommend which mode of Monetary Policy would be used, which tools would be used, how they would be used, and how they would affect M1, and other relevant macroeconomic variables. Additionally, show these effects on the two graphs MIND for effects of Monetary policy on M1 and i, and then another ADIAS graph for after Monetary policy is effective, and summarize these effects in a paragraph. If Monetary Policy is not appropriate, write a paragraphs explaining whv and show whv on an ADKAS graph

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