Table 17-2 -Refer to Table 17-2.The Hypothetical Information in the Table Shows

question 139

Essay

Table 17-2

-Refer to Table 17-2.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.

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Definitions:

Surface Cues

External or superficial features of an object or situation that can influence perception and decision-making.

Source Attractiveness

A concept in communication and marketing that suggests messages are more effective when the source is viewed as physically appealing, relatable, or likeable.

Mental Energy Levels

The capacity to perform mental activities, characterized by cognitive alertness, focus, and overall psychological vitality.

Explicit Conclusions

Refers to clearly stated outcomes or judgments that are directly derived from the presented data or evidence.