Problem
I. Now suppose the FOMC statement were to differ slightly and now reads as follows:
"Information received by the FOMC indicates that inflation increased much faster than anticipated, while the unemployment rate remains somewhat below its estimated natural rate. Price increases in goods appear to be primarily driven by supply shortages in chip factories due to extreme weather events and are expected to ease within the next 6 months. So far, wage increases have been moderate."
Discuss in detail how the differences in the statements would affect your assessment of the economy and compare the state of the economy in this statement with the Fed's dual mandate.
II. In light of this new statement, would you give a different monetary policy recommendation compared to your original recommendation? Why or why not? Please explain.