Assume that you have been invited to advise the Federal Reserve Chairman about the direction of U.S. monetary policy for the year ahead.
- Prepare a summary of these key indicators for the U.S. economy: current inflation, current unemployment, and current real GDP growth.
- Based on these indicators, describe the state of the U.S. economy in terms of the business cycle.
- Propose a monetary policy (contractionary or expansionary) that responds to current economic conditions. Be specific about which tool of monetary policy you will use and how it works.
- Make your case for the policy by describing its expected impact using the AD-AS model.