ECON: MACRO4
4th Edition
ISBN: 9781305436862
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 14, Problem 4.8PA
To determine
Tools used by Federal Reserve to pursue
Introduction:
FED also known as the Federal Reserve System is the central bank of the United States of the America.
Monetary policy is the tool by which central bank of the country controls the monetary base in the country or economy. Central bank has many tools to pursue the monetary policy.
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A rise in consumption in the economy would cause an increase in aggregate demand. Therefore, when consumers spend money on everyday goods and services, it not only helps to stimulate economic growth, but it could also present potential issues like unsustainable debt levels or inflation. I believe that it would be beneficial to consider such factors and adopt a purchasing strategy to help navigate the challenges posed by inflation or unsustainable debt levels.
First, do you think our business will be affected because inflation is rising? How?
Yes, I do believe that the business will be affected because of inflationary pressures. Inflation rising will affect the cost of goods, services, and labor, which could lead to higher operating expenses. The potential reduction of profit margin because of inflation could lead to a smaller percentage of revenue being retained as profit. Therefore, inflation rising will force us to raise prices for…
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