Suppose You Are an Economist Working for the Federal Reserve

question 18

Essay

Suppose you are an economist working for the Federal Reserve when droughts in the Southeast and floods in the Midwest substantially reduce food production in the United States. Use the aggregate demand-aggregate supply model to illustrate graphically your policy recommendation to accommodate this adverse supply shock, assuming that your top priority is maintaining full employment in the economy. Be sure to label: i. the axes; ii. the curves; iii. the initial equilibrium values; iv. the direction the curves shift; and v. the terminal equilibrium values. State in words what happens to prices and output as a combined result of the supply shock and the recommended Fed accommodation.

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Definitions:

Respondent Behaviors

Actions that are automatic reactions to certain stimuli, often used in the context of classical conditioning in psychology.

Unique Cluster

A distinctive group or combination of elements that are brought together based on specific characteristics or criteria.

Variable-Interval

A type of reinforcement schedule in which reinforcements are given to a response at unpredictable time intervals.

Fixed-Ratio

A schedule of reinforcement where a response is rewarded only after a specified number of responses, commonly used in behavior analysis.