The Federal Reserve in 2008 faced a decrease in aggregate demand caused by the housing and financial crises and a decrease in short-run aggregate supply caused by rising commodity prices. Required:
a. Starting from a long-run equilibrium, illustrate the effects of these two changes using both an aggregate-supply/aggregate-demand diagram and a Phillips-curve diagram.
b. Suppose the Fed responds quickly to these shocks and adjusts monetary policy to keep unemployment and output at their natural rate. What action would it take?
c. Why might the Fed choose not to purse the course of action described in part (b)?

Jennifer purchased a house in a brand new development in the outskirts of town. when her house was built, the nearest fire department was nearly 20 miles away. as her neighborhood developed, the density of the community called for a new fire department 1.5 miles away. what effect will the new fire station have on her homeowners insurance premium? a. a new fire department will be more demanding on local taxes. her annual premium will go up. b. the location of a fire department has no bearing on the value of her house. her annual premium will stay the same. c. the new fire department will reduce the risk of financial loss in her home. her annual premium should decrease. d. with a fire department so close (less than 5 miles), financial risk on jennifer’s home practically disappears. she will not need to pay insurance anymore.

Money from an allowance or job is known as .

If the economy were in the contracting phase of the business cycle, how might that affect your ability to find work?