Hypothetical Scenario: *actual GDP is measured to be 3% below potential. Measured unemployment, by most accounts is thought to be 2% above the natural rate of unemployment. Given that current inflation is relatively low:
- What will the federal reserve most likely do at the next few Federal Open Market Committee?
- Assuming the Fed follows the policy course you set fourth in part (1), what should the fed be concerned with the years that follow?
- Given your answers in question 1 and 2, what do you think the Fed will have to do in terms of interest rate policy in the next few years?
I have to write an essay, so I’m not looking for spot on responses, just a general concept so I can write my essay.