Table 26-2
-Refer to Table 26-2.The hypothetical information in the table shows what the values for real GDP and the price level will be in 2011 if the Federal Reserve does not use monetary policy:
a.If the Fed wants to keep real GDP at its potential level in 2011,should it use an expansionary policy or a contractionary policy? Should the trading desk buy T-bills or sell them?
b.Suppose the Fed's policy is successful in keeping real GDP at its potential level in 2011.State whether each of the following will be higher or lower than if the Fed had taken no action:
(i) Real GDP
(ii) Full-employment real GDP
(iii) The inflation rate
(iv) The unemployment rate
c.Draw an aggregate demand and aggregate supply graph to illustrate your answer.Be sure that your graph contains LRAS curves for 2010 and 2011; SRAS curves 2010 and 2011; AD curve for 2010 and 2011,with and without monetary policy actions; and equilibrium real GDP and the price level in 2011 with and without policy.
Definitions:
Urinary System
Organ system of humans that includes the kidneys, urinary bladder, and associated structures; excretes metabolic wastes; maintains fluid balance; helps control pH.
Blood Ph
The measure of acidity or alkalinity of blood, maintained within a very narrow range, essential for physiological processes.
Nitrogenous Wastes
Waste products containing nitrogen, such as urea and ammonia, excreted by living organisms.
Nephrons
The basic structural and functional units of the kidney, responsible for filtering blood and creating urine.
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