What kind of problem is the U.S. economy facing? Give one possible reason why this problem may exist. State whether the Fed should use fiscal policy or monetary policy to address the situation. Given the stated policy in your answer to question #2, indicate what specific policy tool you would recommend as the appropriate course of action and why you are recommending this tool.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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  1. What kind of problem is the U.S. economy facing? Give one possible reason why this problem may exist.
  2. State whether the Fed should use fiscal policy or monetary policy to address the situation.
  3. Given the stated policy in your answer to question #2, indicate what specific policy tool you would recommend as the appropriate course of action and why you are recommending this tool.
  4. Policy Implementation:
    1. Utilizing the figure above as your starting point, illustrate (graph) the macroeconomic situation of the United States after a successful implementation of the policy tool you’ve recommended.
    2. What are the effects on the macroeconomy on GDP and the aggregate price level?
Aggregate
LRAS
price
level
SRAS
P1
E1
AD1
Potential Real GDP
output
Y1
Yp-
Transcribed Image Text:Aggregate LRAS price level SRAS P1 E1 AD1 Potential Real GDP output Y1 Yp-
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