You Are the Liaison Between the Federal Reserve Board and the U.S.Treasury

question 90

Essay

You are the liaison between the Federal Reserve Board and the U.S.Treasury Department.Your goal is to coordinate policy efforts to achieve full-employment output in the economy while keeping a fixed real interest rate.You must recommend tightening or easing both monetary and fiscal policies to do this.What would your recommendation be in each of the following situations?
(a)People decide to increase saving.
(b)Expected inflation declines.
(c)The future marginal productivity of capital declines.
(d)There's an adverse oil price shock in which the LM curve moves farther to the left than does the FE line.

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Definitions:

Suprachiasmatic Nucleus

A part of the brain located in the hypothalamus, responsible for controlling circadian rhythms.

Circadian Rhythm

The biological clock that regulates sleep-wake cycles and other physiological processes in a roughly 24-hour cycle.

Born Blind

The condition of lacking visual perception from birth due to biological or genetic factors.

Visual Images

Visual images refer to mental pictures or representations of objects, scenes, or events created in the mind.