Chapter 13
2. Under what circumstances might the Fed’s maximum employment goal conflict
with its price stability goal?
3. How does monetary policy affect aggregate demand through wealth effects?
11. What is meant by disinflation? If the United States were experiencing disinflation, what would you conclude about the relationship between actual output (aggregate demand) and potential output (aggregate supply)? The unemployment rate?
Chapter 14
11. Go to the Board’s website and read the most recent statement issued by the FOMC. Identify the sentences that are intended to influence expectations held by the public.
12. What is meant by the zero-bound constraint? How has it affected the ability of the Fed to achieve its goals? How has the credit crunch affected the ability of the Fed to achieve its goals?
Chapter 15
5. What is an adverse feedback loop? How does this work to worsen the financial system and the economy?
10. What approach has the Dodd-Frank bill of 2010 taken to prevent financial crises from developing? Explain.