Macroeconomic Analysis:

In the context of the basic macroeconomic model developed in class, analyze the impact of each of the following economic changes(ceteribus paribus) on domestic real GDP, inflation, the unemployment rate, and the budget deficit.Be sure to explain the relationships and linkages carefully. Then illustrate your results using an aggregate demand- aggregate supply graph (separate graph for each change)

c) Oil prices continue to increase in international energy markets.

d) Personal income increases dramatically in March due to Biden's third round of economic stimulus checks.

e) Many manufacturing facilities, e.g., automobile plants are opening up and expanding production after the Covid-19 "lockdown."

1) What is meant by the term inflation? How is inflation measured in the U. S. economy? What is the Federal Reserve Bank's (FED) target for inflation? What was the percentage increase in consumer price index (CPI) between March 2022 and March 2023?

2) Identify at least 3 supply side factors that are causing inflation. Identify at least 3 demand side factors that are causing inflation. Show the impact these supply and demand shifts in an aggregate demand-aggregate supply graph. Explain why the current inflation "defies the old models."

3) When the Federal Reserve Bank (FED) meets this week (May 2-3) what monetary policy changes do you expect to keep inflation under control? What is meant by the term "neutral" interest rate? How high will the FED have to raise the federal funds interest rate before it is a "neutral" rate? How long will this take?How will this impact inflation in 2023 and inflationary expectations in financial markets going forward. Is the FED likely to meet it's target inflation rate by the end of 2023? Explain your reasoning carefully.