3. "Inflation is much too high and we understand the hardship it is causing. We're movingexpeditiously to bring it back down," Fed Chairman Jerome Powell said during a newsconference.(Source: CNBC.com)Given the above statement, suggest a policy which can be implemented by the Fed toaddress the inflationary pressure. Assume that the Fed were to adopt required reserveratio, using AD-AS model, explain the outcomes of this move on the economy in theshort run. (You may exclude LRAS curve in your model)

Answered: 3. "Inflation is much too high and we…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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3. "Inflation is much too high and we understand the hardship it is causing. We're moving
expeditiously to bring it back down," Fed Chairman Jerome Powell said during a news
conference.
(Source: CNBC.com)
Given the above statement, suggest a policy which can be implemented by the Fed to
address the inflationary pressure. Assume that the Fed were to adopt required reserve
ratio, using AD-AS model, explain the outcomes of this move on the economy in the
short run. (You may exclude LRAS curve in your model)

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Step 1

Inflationary condition Inflation is based on related to the rise in price levels. Positive rate inflation is referred that when inflation helps to increase consumer demand and consumption and boost economic growth it is positive.

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