Please answer question 5: May 4, 2022"The invasion of Ukraine by Russia is causing tremendous human and economic hardship. Theimplications for the U.S. economy are highly uncertain. The invasion and related events are creatingadditional upward pressure on inflation and are likely to weigh on economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highlyattentive to inflation risks.The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over thelonger run. With appropriate firming in the stance of monetary policy, the Committee expects inflation toreturn to its 2 percent objective and the labor market to remain strong. In support of these goals, theCommittee decided to raise the target range for the federal funds rate to 3/4 to 1 percent and anticipatesthat ongoing increases in the target range will be appropriate." Source: Federal Reserve press release -May 4, 2022June 15, 2022"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over thelonger run. In support of these goals, the Committee decided to raise the target range for the federalfunds rate to 1-1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will beappropriate. In addition, the Committee will continue reducing its holdings of Treasury securities andagency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size ofthe Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed toreturning inflation to its 2 percent objective." Source: Federal Reserve press release - June 15, 2022July 27, 2022"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over thelonger run. In support of these goals, the Committee decided to raise the target range for the federalfunds rate to 2-1/4 to 2-1/2 percent and anticipates that ongoing increases in the target range will beappropriate. In addition, the Committee will continue reducing its holdings of Treasury securities andagency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size ofthe Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed toreturning inflation to its 2 percent objective."Source: Federal Reserve press release - July 27, 20225. In 2022, from May 4th to July 27th,(Select All that Apply)Helpful Hint: There are 5 correct answers.A. the cost to borrow money increased and/or is likely to increaseB. the cost to borrow money decreased and/or is likely to decreaseC. the FED is responding to the recessionary gapD. the FED is responding to inflationary pressuresE. the FED was/is trying to increase the money supplyF. the FED was/is trying to decrease the money supplyG. the FED was/is trying to engage in expansionary monetary policyH. the FED was/is trying to engage in contractionary monetary policy1. the FED was/is trying to engage in expansionary fiscal policyJ. the FED was/is trying to engage in contractionary fiscal policyK. the federal funds rate increased and/or will continue to increaseL. the federal funds rate decreased and/or will continue to decrease

- Target: keep inflation and the employment at 2% in the long run - Federal Funds rate increased:…

5. In 2022, from May 4th to July 27th, (Select All that Apply) Helpful Hint: There are 5 correct answers. A. the cost to borrow money increased and/or is likely to increase B. the cost to borrow money decreased and/or is likely to decrease C. the FED is responding to the recessionary gap D. the FED is responding to inflationary pressures E. the FED was/is trying to increase the money supply F. the FED was/is trying to decrease the money supply G. the FED was/is trying to engage in expansionary monetary policy H. the FED was/is trying to engage in contractionary monetary policy 1. the FED was/is trying to engage in expansionary fiscal policy J. the FED was/is trying to engage in contractionary fiscal policy K. the federal funds rate increased and/or will continue to increase L. the federal funds rate decreased and/or will continue to decrease

5. In 2022, from May 4th to July 27th, (Select All that Apply) Helpful Hint: There are 5 correct answers. A. the cost to borrow money increased and/or is likely to increase B. the cost to borrow money decreased and/or is likely to decrease C. the FED is responding to the recessionary gap D. the FED is responding to inflationary pressures E. the FED was/is trying to increase the money supply F. the FED was/is trying to decrease the money supply G. the FED was/is trying to engage in expansionary monetary policy H. the FED was/is trying to engage in contractionary monetary policy 1. the FED was/is trying to engage in expansionary fiscal policy J. the FED was/is trying to engage in contractionary fiscal policy K. the federal funds rate increased and/or will continue to increase L. the federal funds rate decreased and/or will continue to decrease

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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CPI inflation in India rose to 4.9% y-o-y in November from 4.5% in October, below expectations (5.1%), with a downside surprise in food and fuel price inflation, but core inflation rose further to 6.1% from 5.9%, signalling rising underlying price pressures. The cut in excise duties on fuel was offset by higher price increases in personal care, clothing, recreation and households goods and services in the CPI basket, suggesting pressures due to rising input cost pass-through and reopening. Source: Economic Times (2021) In this context, suppose people in India anticipate an increase in the expected price level. a) Determine whether the event shifts aggregate demand (AD) or aggregate supply (AS). (6 marks) b) Use the AD-AS model to determine the short-run and long-run effects on India’s GDP, price level, and unemployment.
CPI inflation in India rose to 4.9% y-o-y in November from 4.5% in October, below expectations (5.1%), with a downside surprise in food and fuel price inflation, but core inflation rose further to 6.1% from 5.9%, signalling rising underlying price pressures. The cut in excise duties on fuel was offset by higher price increases in personal care, clothing, recreation and households goods and services in the CPI basket, suggesting pressures due to rising input cost pass-through and reopening. In this context, suppose people in India anticipate an increase in the expected price level. a) Determine whether the event shifts aggregate demand (AD) or aggregate supply (AS). b) Use the AD-AS model to determine the short-run and long-run effects on India’s GDP, price level, and unemployment.
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