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The last five months has seen inflation rising at a faster rate. Five months ago inflation was rising at an annual rate of 2%. Now 5 months later, the annual rate is over 20%. The highest in 35 years. Retail sales are strong with monthly increases of at least 4%. Car sales have been up every month for the last year. The average increase in car sales has been 5% per month the highest in 20 years. The housing market is booming with monthly increases in sales of new homes of over 4%. Unemployment is 2.8% and falling. Most economists believe the unemployment rate is below the natural rate of unemployment of 4.5%. Most businesses have almost no inventories due to the booming economy. The money supply has been increasing at an annual rate of 10%. Answer the following below:

1. The problem in the economy, if any (Describe from the information given in the paragraph, why you chose that particular problem).

2. The monetary and fiscal policy to be used;

3. The tools of the policy and how they work to correct the problem;

4. Any undesirable consequences that may arise when the Fed and/or the federal government implement the policy.

5. In your discussion please discuss the branch of the government that will implement each of these policies (Federal government or Federal Reserve).
in Other by (170 points)  

1 Answer

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The governement keeps printing more money with nothing to back it up. Can you see the problem here?

by (17.1k points)  



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