Suppose That the Fed Unexpectedly Pursues Contractionary Monetary Policy

question 181

Essay

Suppose that the Fed unexpectedly pursues contractionary monetary policy. What will happen to unemployment in the short run? What will happen to unemployment in the long run? Justify your answer using the Phillips curves.

---

Definitions:

Downsizing

The process of reducing the size of a company by eliminating staff positions, often to improve efficiency or reduce costs.

Cash Crop

A crop produced primarily for sale rather than for the farmer's own use, often generating significant income for farmers and economies, examples include tobacco, cotton, and sugar cane.

General Stores

Local retail establishments that carry a wide variety of goods including food, clothing, and household items, particularly relevant in rural areas of the 19th and early 20th centuries.

Farm Families

are households that engage in agriculture, managing farms for the production of crops and raising livestock, often spanning multiple generations.