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Author Question: How would you expect the Fed to respond to a negative supply shock in the economy? What will be ... (Read 35 times)

OSWALD

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on: Jun 29, 2018
How would you expect the Fed to respond to a negative supply shock in the economy?
 
  What will be an ideal response?

Question 2

Hyperinflations occur because governments want to spend more than they raise in taxes, and they pay for the extra purchases by printing money.
 
  Indicate whether the statement is true or false


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Bigfoot1984

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Reply #1 on: Jun 29, 2018
Answer to Question 1

The Fed will follow expansionary monetary policy to increase aggregate demand, which will increase inflation and reduce unemployment, if the Fed is focused on restoring real GDP in the economy. If the Fed is focused on reducing inflation, however, it will follow contractionary monetary policy, although employment and real GDP will be negatively affected.

Answer to Question 2

TRUE


OSWALD

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Reply #2 on: Jun 29, 2018
Thank you


Bigfoot1984

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Reply #3 on: Jun 29, 2018
No problemo


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