The hypothetical information in the following table shows what the values for real GDP and the price level will be in 2017 if the Fed does not use monetary policy: Year Potential GDP (trillion) $17.7 $18.1 Real GDP (trillion) Price level 2016 2017 a. If the Fed wants to keep real GDP at its potential level in 2017, should it use an expansionary or contractionary policy? Should the Fed buy or sell Treasury bills? $17.7 114 $17.9 116 b. Suppose the Fed's policy is successful in keeping real GDP at its potential level in 2017. States whether each of the following will be higher or lower if the Fed had taken no action. I. Real GDP II. The inflation rate III. The Unemployment rate

The hypothetical information in the following table shows what the values for real GDP and the price level will be in 2017 if the Fed does not use monetary policy: Year Potential GDP (trillion) $17.7 $18.1 Real GDP (trillion) Price level 2016 2017 a. If the Fed wants to keep real GDP at its potential level in 2017, should it use an expansionary or contractionary policy? Should the Fed buy or sell Treasury bills? $17.7 114 $17.9 116 b. Suppose the Fed's policy is successful in keeping real GDP at its potential level in 2017. States whether each of the following will be higher or lower if the Fed had taken no action. I. Real GDP II. The inflation rate III. 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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