Question

You are appointed the Chairperson of the FOMC. Use the link below to run a monetary simulation. You are required to hit the inflation target. In order to receive credit, you have to reappointed by hitting both your inflation and unemployment targets. You can run the simulation as many times as necessary. When you are successful enter in the ending inflation and unemployment rates.

What is your ending inflation rate?

A. Above 6.0%
B. Between 5.0% - 5.9%
C. Between 3.6% - 4.9%
D. Between 0.1-3.5%

Answer 1

D. Between 0.1-3.5%

Step-by-step explanation:

Inflation rate of a country is defined as a change in monetary value of goods and services over a certain period. In the given scenario we are required to keep inflation rate at 2% and unemployment rate 5%. The Philips curve demonstrates a stable inverse relation between rates of unemployment and inflation. In the short run there is trade off between unemployment and inflation which means inflationary policies will result to decrease the unemployment rate.