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6. In 2023, breakthroughs in solar panel manufacture and installation and low-cost battery storage allow tens of millions of Americans and businesses to slash their energy bills and produce more for every energy dollar. Assume the growth rate in 2022 was 2% and inflation was 2% a. Show what kind of effects these breakthroughs would have on inflation and growth in 2023 and on into the long run. b. Assume the Federal Reserve aims to keep inflation at 2% per year. What would the Fed do in response to the events of 2023? Assume the economy is at its second short run equilibrium after the 2023 events when the Fed acts (i.e, shift SRAS once due to a change in expected inflation before modeling the Fed's action). What does the Fed's action do to inflation and growth in the short run? How would the Fed's actions work out in the long run?

6. In 2023, breakthroughs in solar panel manufacture and installation and low-cost battery storage allow tens of millions of Americans and businesses to slash their energy bills and produce more for every energy dollar. Assume the growth rate in 2022 was 2% and inflation was 2% a. Show what kind of effects these breakthroughs would have on inflation and growth in 2023 and on into the long run. b. Assume the Federal Reserve aims to keep inflation at 2% per year. What would the Fed do in response to the events of 2023? Assume the economy is at its second short run equilibrium after the 2023 events when the Fed acts (i.e, shift SRAS once due to a change in expected inflation before modeling the Fed's action). What does the Fed's action do to inflation and growth in the short run? How would the Fed's actions work out in the long run?

Brief Principles of Macroeconomics (MindTap Course List)
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter12: Money Growth And Intlation
Section: Chapter Questions
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6. In 2023, breakthroughs in solar panel manufacture and installation and low-cost battery storage allow tens of millions of Americans and businesses to slash their energy bills and produce more for every energy dollar. Assume the growth rate in 2022 was 2% and inflation was 2% a. Show what kind of effects these breakthroughs would have on inflation and growth in 2023 and on into the long run. b. Assume the Federal Reserve aims to keep inflation at 2% per year. What would the Fed do in response to the events of 2023? Assume the economy is at its second short run equilibrium after the 2023 events when the Fed acts (i.e, shift SRAS once due to a change in expected inflation before modeling the Fed's action). What does the Fed's action do to inflation and growth in the short run? How would the Fed's actions work out in the long run?
Transcribed Image Text:6. In 2023, breakthroughs in solar panel manufacture and installation and low-cost battery storage allow tens of millions of Americans and businesses to slash their energy bills and produce more for every energy dollar. Assume the growth rate in 2022 was 2% and inflation was 2% a. Show what kind of effects these breakthroughs would have on inflation and growth in 2023 and on into the long run. b. Assume the Federal Reserve aims to keep inflation at 2% per year. What would the Fed do in response to the events of 2023? Assume the economy is at its second short run equilibrium after the 2023 events when the Fed acts (i.e, shift SRAS once due to a change in expected inflation before modeling the Fed's action). What does the Fed's action do to inflation and growth in the short run? How would the Fed's actions work out in the long run?
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