How Can the Fed Keep the Economy from Falling into a Recession

question 16

Essay

How can the Fed keep the economy from falling into a recession if the budget deficit is reduced? Use the IS-LM model to illustrate graphically the impact of both the fiscal policy reducing the deficit and the monetary policy, which prevents output from falling. 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.

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Definitions:

Informal Rule Making

A regulatory process allowing for the development and issuance of rules without a formal hearing.

Formal Hearing Process

A structured legal procedure involving the presentation of evidence and legal arguments before a judicial authority to resolve a dispute.

Administrative Agencies

Governmental bodies with the authority to implement and administer particular legislation, often with rule-making and adjudicative functions.

Federal Level

pertains to governmental authority and activities that are conducted at the national level, as opposed to state or local levels.