An economy begins in long-run equilibrium.   a. Consider the formulation of an oil cartel. Illustrate and explain how this affects prices and output over time. b. If the goal of the Fed is to stabilize the output, what should the Fed do with the money supply in response to this change? Illustrate and explain.

The United States Federal Reserve has two mandates when setting monetary policy - keep annual inflation low (around 2-3%) and the unemployment rate low (around 5%).  Typically, efforts to adjust the money supply to cause inflation to decrease causes unemployment to increase and vice versa. Now, imagine a situation where the United States faces high inflation and high unemployment (called stagflation, was issue in late 1970s).  What do you think the Federal Reserve should do in this situation?

EconomyRead the following premise carefully and answer the questions specifically and in detail. "Faced with instability in economic growth due to a recession or accelerated inflation, the Fed uses the open market operation to increase or decrease the available reserves of commercial banks which, in turn, will affect the amount of money available in the economy. economy In addition to open market operation, the Fed has other tools available to promote the growth, sustainment and economic stability of a country.These tools have been used historically; "A good example was the mortgage debt crisis of 2008." 1. Explain in detail monetary policy, its function and its effects on short- and long-term economic fluctuations. Use the aggregate demand and supply model presented in the course. 2. Explain each of the tools that exist in expansionary monetary policy and contractionary monetary policy.

Which of the following is NOT one of the three tools used by the Fed to implement US monetary policies? discount rate printing more money open market operations reserve requirement regulations