Suppose you are given the following scenario: The Federal Reserve has reported the federal funds rate...

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Suppose you are given the following scenario: The Federal Reserve has reported the federal funds rate at 0.75 percent. The economy's growth rate over the past several quarters has languished around 1 percent (annualized) per year while unemployment has increased by 1.5 percentage points to a current national average of 8.7 percent. The GDP Deflator index has remained relatively steady, yielding an average inflation rate of 2.4 percent over the last two years. 1. You are a policy advisor who believes in Keynesian economics. In your answer, identify the economic problem best being described in the scenario above. (1 point) 2. Identify the appropriate economic policy (you can use fiscal or monetary) that would be most effective in responding to the economic problem in Question 1. (1 point) 3. Briefly explain the consequences your recommended policy would have on the macroeconomy in both the short-run and the long-run. (2 points) Suppose you are given the following scenario: The Federal Reserve has reported the federal funds rate at 0.75 percent. The economy's growth rate over the past several quarters has languished around 1 percent (annualized) per year while unemployment has increased by 1.5 percentage points to a current national average of 8.7 percent. The GDP Deflator index has remained relatively steady, yielding an average inflation rate of 2.4 percent over the last two years. 1. You are a policy advisor who believes in Keynesian economics. In your answer, identify the economic problem best being described in the scenario above. (1 point) 2. Identify the appropriate economic policy (you can use fiscal or monetary) that would be most effective in responding to the economic problem in Question 1. (1 point) 3. Briefly explain the consequences your recommended policy would have on the macroeconomy in both the short-run and the long-run. (2 points)

Answer rating: 100% (QA)

1 Identifying the Economic Problem The economic problem being described in the scenario is likely a situation of economic stagnation or recession The ... View the full answer