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[answered] Assume the economy is suffering from high unemployment due


1. Assume the economy is suffering from high unemployment due to decreases in aggregate

demand and you are the Chairman of the Fed. What monetary policy/ tool would you

employ and then using the cause-effect chain, explain the effect it would have on the

economy.

2. What is the multiplier effect as it relates to money creation? What determines the size of

the potential money multiplier? What is the difference between the potential and real

multiplier??

3. Assume the economy is suffering from massive inflation and you are the Chairperson of

the FED. What monetary policy/tool would you employ and then using the cause-effect

chain, explain the effect it would have on the economy.?

4. The European Union (EU) has a provision in what is called the Stability and Growth Pact

that limits annual budget deficits to 3 percent of GDP and its net public debt to no more

than 60 percent of its GDP. Suppose that a country finds that it has a budget deficit

is currently 3 percent of GDP and/or a level of net public debt equal to 60 percent of

GDP. Could that country use countercyclical fiscal policy to stabilize its economy at all?


5. Explain at least two ways how deficit spending could be a burden to future generations.


Running Head: ECONOMY AND UNEMPLOYMENT Economy and Unemployment

 

Student?s Name

 

Institution ECONOMY ANDEMPLOYMENT 2 When in a country there is increased unemployment the economy will suffer since...

 


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