Question

Last names beginning with K-O:

Assume that you are the Fed Chairman and that the country is experiencing a recession. What type of monetary policy would you enact in order to address the recession? Be specific with your policy recommendations. What would happen to the money supply, the interest rate, equilibrium GDP, inflation, and unemployment as a result of your actions? Why?

Last names beginning with P-Z:

Assume that you are the Fed Chairman and that the country is experiencing a high rate of inflation. What type of monetary policy would you enact in order to address the inflation? Be specific with your policy recommendations. What would happen to the money supply, the interest rate, equilibrium GDP, inflation, and unemployment as a result of your actions? Why?

Answer 1

if the country is experiencing a recession as a chairman of fed i will employ expansionary monetary policy to increase money supply in the economy. expansionary monetary policy simply brings the rate of interest down to promote investment in the economy. increased investment creates employment and increases income for prople. with higher income people demand goods and services which further creates base for investment. output and total gdp increases in the economy. unemployment declines and money supply further increases which combats the recessionary situation. so expansionary monetary policy will fairly work.

if the country is facing a high rate of inflation then as a chairman of fed i will employcontrationary monetry policy. it will push the rate of interest rate to go up, which will restrict the investment demand. there will be less investment in the economy and so will be the rate of employment. unemployment rate will increase and the money income of people will decline. this will lower the demand for gooda and services and the demand for money as well. low demand for money will pull the inflation rate to down so here contrationary monetary policy will work perfectly fine. gdp and the totl output will decrease as well.