What can the Fed do to reduce inflation when the government is spending too much money in the economy

Q: In 2004 the Fed began raising interest rates? What is likely to happen to the price level and real…

A: The macroeconomic equilibrium in an economy is determined by the aggregate demand and aggregate…

Q: A central bank pledges to reduce the inflation rate from 10% to 3%. People reduce their inflation…

A: Inflation is the rise in average general price level over period of time . It reduces the value of…

Q: Suppose the U.S. economy is initially at long run equilibrium, when there is an unexpected large…

A: When the U.S economy is in long-run equilibrium and the government spending falls unexpectedly, the…

Q: employment and low inflation

A: The Phillips curve depicts the relationship between the inflation rate and unemployment rate. It…

Q: The FED is facing a problem of unemployment. What policy should be used? How would each of the tools…

A: FED is used to refer to the federal government of the United States.

Q: The president needs to make any changes to the economy through the Fed?? True or False

A: In any economy, two types of polices are implemented to influence the economy. The two polices are…

Q: The time inconsistency of policy implies that a. what policymakers say they will do is generally…

A: Time Consistency Policy: In this policy, an opportunity or the incentive to renege is lacked by the…

Q: Does the Quantity Theory of Money adequately explain the cause of inflation?

A: The quantity theory of money assumes that the amount of money in a country has more influence on its…

Q: experiencing inflation that exceeds the target rate set by the central bank.

A: Inflation is a situation in which the money in hands of the people or the money supply in the…

Q: Banks follow the Fed’s lead to influence the economy and prevent a financial downturn? True or false

A: Fed is the supervisor of all the banks in the nation.

Q: What measures should the central bank take to reduce inflation? Show by drawing a graph.

A: There are major measures the central bank can take to control inflation in the economy, which can be…

Q: The economy's unemployment rate is 2% and the inflation rate is 18%. The most appropriate policy for…

A: As we know that Phillips curve shows the relationship between inflation and Unemployment rate . And…

Q: Discuss the costs of inflation (give two negatives) and the costs to the economy if the FED uses…

A: When such an economy expands as a result of greater spending but not as a result of increased…

Q: Exercise 11.7 In the two years before 2008 the Canadian federal government reduced the GST from 7…

A: Exercise 11.7 In the two years before 2008 the Canadian federal government reduced the GST from 7…

Q: What do we mean by the Federal Reserve’s “targeted” inflation and unemployment rates?

A: Targeted inflation and unemployment rate are monetary phenomenon which are handled by the Federal…

Q: What is the reason behind the Federal Reserve to keep rates near zero until  full employment,…

A: Fed encourages to keep interest rates near zero to enhance exonomic activities.

Q: The Fed has an obligation of the "full employment mandate". What is that exactly? How is it…

A: The Federal Reserve in the U.S was created on 23rd December 1913. It is the central bank of the U.S.…

Q: Suppose the Fed decides to implement expansionary monetary policy. This will likely result in a…

A: Answer: (1). Increase in money supply (2). Decrease in the interest rates Explanation: Suppose the…

Q: Which one of these policies should the Fed engage in if unemployment is very high and inflation is…

A: Answer - Need to find- Which one of these policies should the Fed engage in if unemployment is very…

Q: The demand for money will increase when inflation increases. True or false

A: The demand for money is of three types. These are transaction demand for money, precautionary demand…

Q: If the Federal Reserve decides to raise the interest rate to solve a potential inflation problem,…

A: In the United States, if Federal Reserve raised interest rate to deal with inflation, it is known as…

Q: Suppose the U.S. economy is initially at long run equilibrium, when there is an unexpected economic…

A: Since you have posted a question with multiple parts, we will solve only the first part. To get…

Q: Congress raises taxes and the Fed reduces money supply, then in the short run, the two  policies…

A: *ANSWER:-  * The OPTION A (lower-income but we don't know if the interest rate will rise or not) is…

Q: If the Fed wants to lower the interest rate, what should they do with the money supply? What tools…

A: Both Central Bank and Central Government have different tools which will help to control the money…

Q: Which statement explains how the Federal Reserve can control rising inflation?

A:

Q: What are the goals of monetary policy? What are the monetary policy targets? Which target is…

A: What are the goals of monetary policy? The objectives of monetary policy are to advance most extreme…

Q: The fed controls the prime interest rate? True or False

A: Fed is the central bank of the Unites States of America.  The functions of Fed includes: (i)…

Q: Suppose the U.S. economy is initially at long run equilibrium, when there is an unexpected economic…

A: Since you have posted a question with multiple parts, we will solve only the first part. To get…

Q: Why is there no upward or downward pressure on the inflation rate when the economy is at full…

A: Inflation refers to the rise in general price levels in an economy. Philips curve shows the…

Q: If the Federal Reserve believes that the economy is heating up and there is a risk that inflation…

A: If federal reserve believes that the economy is heating and also there is chances to risk the…

Q: It is 2019 and our economy has been growing too fast. The Fed is worried that inflation could become…

A: The measures taken by a country's central bank to regulate the money supply and achieve long-term…

Q: The Fed typically increases the money supply by selling government bonds buying government loans…

A: Fed is the CB (central bank) of the US. The central bank of the economy manages the MP (monetary…

Q: What do you understand by demand-pull and cost-push inflation? Which monetary policy should be…

A: Inflation in an economy is related to rise in prices of commodities or decrease in purchasing power…

Inflation and Purchasing Power Theory

In economic terms, Inflation refers to the increase in the costs of various commodities which are used in daily lifestyle like food, clothes, transport, etc. over a specific time. It may lead to a fall in the purchasing power of the people and also affects the exchange rate of the currency because of the price increase. As the purchasing power falls the unit of the currency in the economy falls. When the prices of the commodities are decreased, then the purchasing power of the consumers will rise, then it will lead to deflation and changes the currency of the base economy to that of the foreign economy which will lead to change in exchange rates.