Question: Hello, I get problems in this exercise of topic [Monetary Policy] in macroeconomics Year: 2013 Potential Real GDP $13:5 trillion; Real GDP $13:5 trillion; Price

Hello, I get problems in this exercise of topic [Monetary Policy] in macroeconomics

Year: 2013

Potential Real GDP $13:5 trillion; Real GDP $13:5 trillion; Price Level 142

Year: 2014

Potential Real GDP $14:0 trillion; Real GDP $14:4 trillion; Price Level 150

The hypothetical information in the table shows what the values for real GDP and the price level will be in 2014 if the Federal Reserve does not use monetary policy:

a.If the Fed wants to keep real GDP at its potential level in 2014, should it use an expansionary policy or a contractionary policy? Should the trading desk buy T-bills or sell them?

b.Suppose the Fedis policy is successful in keeping real GDP at its potential level in 2014. State whether each of the following will be higher or lower than if the Fed had taken no action:

(i)Real GDP (ii)Full-employment real GDP (iii)The ination rate (iv)The unemployment rate

c.Draw an aggregate demand and aggregate supply graph to illustrate your answer. Be sure that your graph contains LRAS curves for 2013 and 2014; SRAS curves 2013 and 2014; AD curve for 2013 and 2014, with and without monetary policy actions; and equilibrium real GDP and the price level in 2014 with and without policy.

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