question archive The following questions are about money
The following questions are about money
Subject:EconomicsPrice: Bought3
The following questions are about money. a. Describe and explain the 3 functions for money. b. Describe and explain the 4 tools that the Fed uses to change the money supply. c. Explain the problems with putting too much money supply in the economy. 2. Currently, the unemployment rate in the economy is at 8%. However economists estimate that the natural rate of unemployment is at 5%. a) Describe the state of this economy. Graphically show what this economy looks like in the AS-AD model. b) What type of monetary should the government implement? Show the transmission of this monetary policy through the money market, loanable funds market, and the AS-AD model. c) Discuss why it might be better to use monetary policy than fiscal policy. What are some issues that monetary policy can solve that fiscal policy causes? 3. The latest report on inflation shows that the average price level in the economy has gone up by 6% over the past year. The Federal Reserve wants to maintain price stability in the economy at an inflation rate of 2% annually. a) Describe what type of monetary policy should the Fed pursue. How might this help stabilize the economy. b) Explain the transmission of this monetary policy through the money market, loanable funds market, and the AS-AD model. c) Discuss the limitations of monetary policy.
