Only Typing answerI need ASAP ### Can the Fed Eliminate Recessions?The Federal Reserve (Fed) uses monetary policy to offset the effects of a recession (marked by high unemployment and falling prices when actual real GDP falls short of potential GDP) and the effects of rapid expansion (characterized by high prices and wages).**Can the Fed, therefore, eliminate recessions?**- **A.** The Fed can only soften the magnitude of recessions, not eliminate them.- **B.** The Fed can eliminate recessions by properly anticipating the economic events that cause them.- **C.** The Fed can, but chooses not to, eliminate recessions.- **D.** The Fed is only concerned with the money supply and interest rates.### Explanation of the Graph#### Components of the Graph:1. **Axes:** - **Vertical Axis:** Displays the GDP deflator (a measure of the price level). - **Horizontal Axis:** Displays Real GDP in trillions of dollars.2. **Curves:** - **LRAS1 and LRAS2:** Long-Run Aggregate Supply curves, indicating potential GDP. - **SRAS1 and SRAS2:** Short-Run Aggregate Supply curves. - **AD1, AD2, and AD2(policy):** Aggregate Demand curves.#### Key Points:- **Point A:** Represents the initial equilibrium where AD1 meets SRAS1 and LRAS1.- **Point B:** Shows a new equilibrium after a shift in Aggregate Supply and Aggregate Demand.- **Point C:** Represents the policy intervention by the Fed, indicated by the shift in the Aggregate Demand curve to AD2(policy).This graph illustrates how different policies or external factors can shift the Aggregate Demand and Supply curves, impacting GDP and the price level. It visualizes the Fed's potential role in influencing these variables through monetary policy.

Monetary policy refers to the actions and measures taken by a central bank, such as the Federal…

The Fed uses monetary policy to offset the effects of a recession (high unemployment and falling prices when actual real GDP falls short of potential GDP) and the effects of a rapid expansion (high prices and wages). Can the Fed, therefore, eliminate recessions? OA. The Fed can only soften the magnitude of recessions, not eliminate them. B. The Fed can eliminate recessions by properly anticipating the economic events that cause them. C. The Fed can, but choses not to, eliminate recessions. D. The Fed is only concerned with the money supply and interest rates. GDP deflator 120 110 100- 90- 80+ 11.5 LRAS₁ LRAS₂ SRAS₁ 12 12.5 Real GDP ($ trillions) SRAS₂ AD1 AD2,(policy) AD₂

The Fed uses monetary policy to offset the effects of a recession (high unemployment and falling prices when actual real GDP falls short of potential GDP) and the effects of a rapid expansion (high prices and wages). Can the Fed, therefore, eliminate recessions? OA. The Fed can only soften the magnitude of recessions, not eliminate them. B. The Fed can eliminate recessions by properly anticipating the economic events that cause them. C. The Fed can, but choses not to, eliminate recessions. D. The Fed is only concerned with the money supply and interest rates. GDP deflator 120 110 100- 90- 80+ 11.5 LRAS₁ LRAS₂ SRAS₁ 12 12.5 Real GDP ($ trillions) SRAS₂ AD1 AD2,(policy) AD₂

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: The Influence Of Monetary And Fiscal Policy On Aggregate Demand

Section16.3: Using Policy To Stabilize The Economy

Problem 3QQ

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### Can the Fed Eliminate Recessions?

The Federal Reserve (Fed) uses monetary policy to offset the effects of a recession (marked by high unemployment and falling prices when actual real GDP falls short of potential GDP) and the effects of rapid expansion (characterized by high prices and wages).

**Can the Fed, therefore, eliminate recessions?**

- **A.** The Fed can only soften the magnitude of recessions, not eliminate them.
- **B.** The Fed can eliminate recessions by properly anticipating the economic events that cause them.
- **C.** The Fed can, but chooses not to, eliminate recessions.
- **D.** The Fed is only concerned with the money supply and interest rates.

### Explanation of the Graph

#### Components of the Graph:
1. **Axes:**
- **Vertical Axis:** Displays the GDP deflator (a measure of the price level).
- **Horizontal Axis:** Displays Real GDP in trillions of dollars.

2. **Curves:**
- **LRAS1 and LRAS2:** Long-Run Aggregate Supply curves, indicating potential GDP.
- **SRAS1 and SRAS2:** Short-Run Aggregate Supply curves.
- **AD1, AD2, and AD2(policy):** Aggregate Demand curves.

#### Key Points:
- **Point A:** Represents the initial equilibrium where AD1 meets SRAS1 and LRAS1.
- **Point B:** Shows a new equilibrium after a shift in Aggregate Supply and Aggregate Demand.
- **Point C:** Represents the policy intervention by the Fed, indicated by the shift in the Aggregate Demand curve to AD2(policy).

This graph illustrates how different policies or external factors can shift the Aggregate Demand and Supply curves, impacting GDP and the price level. It visualizes the Fed's potential role in influencing these variables through monetary policy.

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