Can you explain, using our general equilibrium theory in the IS-LM and AD-AS curves, why the independence of the Federal Reserve is important for conducting its monetary policy right?

Explain how lowering the reserve requirement ratio by the central bank will affect the aggregate demand at any given price level. Use relevant graphs to support your answer.

Describe a situation where a central bank would want to implement contractionary monetary policy.

Assume the economy is currently operating at the natural rate of unemployment, what effects will using the Expansionary Monetary Policy // "stimulating the economy" have in the short run on output, price level, and interest rates?  Please use the AS/AD and Money Market diagrams to illustrate your answer.

In what ways might monetary policy be superior to fiscal policy? In what ways might it be inferior?

What specific actions could the Federal Reserve take to decrease the money supply and therefore raise interest rates to enact Contractionary Monetary Policy?

Jim lost his job due to a leftward shift of the SRAS curve. He wants to know if the Federal Reserve system can help by doing expansionary (easy) monetary policy. Expansionary monetary policy will output (jobs) and overall prices in the short run. (We'll use this information again in the next question.) raise; raise O lower; raise O raise; lower O lower; lower

Suppose that the IS curve and monetary policy curve are given, respectively, by Y=200-4r and r=-n. 4 Solve for the aggregate demand curve. 1 100-Y 2 *=200- Y 0-1/2 x --Y 2 *= 200- =400--Y 0-1/y 4

Identify which are goals of monetary policy, and which are not. Goals of monetary policy Not goals of monetary policy

Draw a correctly labeled graph of the country’s reserve market, and show how the central bank’s action to move the economy toward its long-run equilibrium affects the policy rate in the short run