Hello,

Could you please help me with this problem set? I am struggling to formulate a correct answer.

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Figure 2: Non-borrowed Reserves vs. Borrowed Reserves, 2005-2022 3. Based on the empirical patterns in Figure 3 below, answer the following questions. Figure 3: Interest Rates and Inflation, 2009-2022 a) Would you say the Federal Reserve System had been effective at maintaining a stable price level before 2020? Explain why. b) Does it make sense to you that the discount rate is always above the federal funds rate in Figure 2? Explain why. Use a diagram to show your point if necessary. c) As shown in Figure 2, inflation has increased by a large margin since 2020 . Meanwhile, the federal funds rate had been close to zero for a large portion of 2020-2022. Do you see any connections between these two facts? If so, can you identify a possible causal link between the two? Explain as rigorously and concisely as possible. Figure 2: Non-borrowed Reserves vs. Borrowed Reserves, 2005-2022 3. Based on the empirical patterns in Figure 3 below, answer the following questions. Figure 3: Interest Rates and Inflation, 2009-2022 a) Would you say the Federal Reserve System had been effective at maintaining a stable price level before 2020? Explain why. b) Does it make sense to you that the discount rate is always above the federal funds rate in Figure 2? Explain why. Use a diagram to show your point if necessary. c) As shown in Figure 2, inflation has increased by a large margin since 2020 . Meanwhile, the federal funds rate had been close to zero for a large portion of 2020-2022. Do you see any connections between these two facts? If so, can you identify a possible causal link between the two? Explain as rigorously and concisely as possible