02 May Real GDP growth has increased. Unemployment is low. All-items inflation and core inflation are low and
ccording to August 2018 through January 2019 data. The Fed looks at this data to determine whether to increase the federal funds rate, or to leave it unchanged (no one is considering a cut in the federal funds rate at this time). What does recent data imply for monetary policy in Spring 2019?
a.Real GDP growth has increased. Unemployment is low. All-items inflation and core inflation are low and stable. Financial markets are becoming optimistic. All this implies that the Fed should increase the federal funds rate.
b.Real GDP growth has increased. Unemployment is low. All-items inflation and core inflation are low and stable. Financial markets are becoming optimistic. All this implies that the Fed should leave the federal funds rate unchanged.
c.Real GDP growth has slowed. Unemployment has increased a little. All-items inflation has fallen a lot; core inflation is stable. Financial markets are becoming pessimistic. All this implies that the Fed should increase the federal funds rate.
d.Real GDP growth has slowed. Unemployment has increased a little. All-items inflation has fallen a lot; core inflation is stable. Financial markets are becoming pessimistic. All this implies that the Fed should leave federal funds rate unchanged.
2). Consider the condition of the goods market in January 2019, using the numbers in the data table. What does the macro model predict will happen in 2019 and 2020, and what does this imply for monetary policy?
a.Output is above potential. Input costs will rise and aggregate supply will decrease, which will increase inflation. For counter-cyclical policy, the Fed should increase the federal funds rate.
b.Output is above potential. Input costs will rise and aggregate supply will decrease, which will increase inflation. For counter-cyclical policy, the Fed should leave the federal funds rate unchanged.
c.Output is above potential. Input costs will rise and aggregate demand will decrease, which will decrease inflation. For counter-cyclical policy, the Fed should increase the federal funds rate.
d.Output is above potential. Input costs will rise and aggregate demand will decrease, which will decrease inflation. For counter-cyclical policy, the Fed should leave the federal funds rate unchanged
3). Consider the condition of the goods market in January 2019, using the numbers in the data table. What does the macro model predict will happen in 2019 and 2020, and what does this imply for monetary policy?
a.Output is above potential. Input costs will rise and aggregate supply will decrease, which will increase inflation. For counter-cyclical policy, the Fed should increase the federal funds rate.
b.Output is above potential. Input costs will rise and aggregate supply will decrease, which will increase inflation. For counter-cyclical policy, the Fed should leave the federal funds rate unchanged.
c.Output is above potential. Input costs will rise and aggregate demand will decrease, which will decrease inflation. For counter-cyclical policy, the Fed should increase the federal funds rate.
d.Output is above potential. Input costs will rise and aggregate demand will decrease, which will decrease inflation. For counter-cyclical policy, the Fed should leave the federal funds rate unchanged.
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