"The Federal Reserve Bank has two mandates when setting monetary policy - keep annual inflation around 2% and the unemployment rate around 5%. (Typically, efforts to adjust the money supply to cause inflation to decrease causes unemployment to increase and vice versa.) Now, imagine a situation/scenario where the United States faces high inflation and high unemployment (stagflation). What do you think the Fed should do in this situation/Outline what you think the Fed should do if faced with stagflation. Give detail explaining what should be done in the situation... INCLUDE what you think the consequences would be for your proposed actions?"

Answer rating: 100% (QA)

During stagflation the application of monetary and fiscal policies will only solve one problem by triggering the other The best policies the Federal Reserve Bank should take are supply side economic p... View the full answer