In the long run, the economic variable(s) that the Federal Reserve can affect is (are) A)...
In the long run, the economic variable(s) that the Federal Reserve can affect is (are)
A) inflation. B) output. C) unemployment. D) A & B only. E) A, B, & C.
In the short-run, the economic variable(s) that the Federal Reserve has significant effect on is (are)
A) inflation. B) output. C) unemployment. D) A & B only. E) A, B, & C.
Provide explanation please
Homework Answers
1) Solution: inflation
Explanation: In the long run, the Federal Reserve can affect only one variable i.e. inflation rate. The forms and workers and firms tend to ignore inflation and do not adjust prices. In the long run the unemployment returns to the natural rate
2) Solution: A, B, & C
Explanation: In the short run, the Federal Reserve can influences inflation and the economy-wide demand for goods and services and, thus the demand for the employees who produce such goods and services.
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