2.6 The hypothetical information in the table below shows what the values for real GDP and the price level would have been in 2019 if the Federal Reserve did not use monetary policy: Year Potential Real GDP Real GDP Price Level 142 2018 $18.5 trillion $18.5 trillion 19.4 trillion 2019 19.0 trillion 150 a) If the Fed wanted to keep real GDP at its potential level in 2019, should it have used an expansionary policy or a contractionary policy? Should the trading desk have bought T-bills or sold them? b) Suppose the Fed's policy was successful in keeping real GDP at its potential level in 2019. State whether each of the following would be higher or lower than if the Fed had taken no action: a. Real GDP b. Full-employment real GDP C. The inflation rate d. The unemployment rate

2.6 The hypothetical information in the table below shows what the values for real GDP and the price level would have been in 2019 if the Federal Reserve did not use monetary policy: Year Potential Real GDP Real GDP Price Level 142 2018 $18.5 trillion $18.5 trillion 19.4 trillion 2019 19.0 trillion 150 a) If the Fed wanted to keep real GDP at its potential level in 2019, should it have used an expansionary policy or a contractionary policy? Should the trading desk have bought T-bills or sold them? b) Suppose the Fed's policy was successful in keeping real GDP at its potential level in 2019. State whether each of the following would be higher or lower than if the Fed had taken no action: a. Real GDP b. Full-employment real GDP C. The inflation rate d. The unemployment rate

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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