Inflation across the board has increased at a rate of 4.3% over the last twelve months. For example, prices for food, gasoline, clothing and entertainment have all increased. Unemployment remains low and stable. What should the Fed do?
1. Should the Fed buy or sell bonds, if any, through open market operations?
2. Is your choice an easy or tight monetary policy?
3. Describe the effect on Aggregate Demand (AD) and GDP.
4. What would be the probable effect on interest rates, inflation, and unemployment?