Question

You must write a calm, rational response to the president’s angry letter. In this letter, you
must include each of the following (though not necessarily in this order):
 Explain why the Fed would believe that a contractionary monetary policy is necessary.
In other words, something would need to be happening in the economy to cause the
Fed to switch to a contractionary policy. Determine what could cause this and give
that as your explanation for why contractionary policy is necessary.

Answer 1

Answer:

1Fulton Virtual Economics: Monetary Policy ProjectIn this project, you willshow your understanding of monetary policy and the Federal Reserve’s tools of monetary policy.Who are you for this project? For this project, you are the Chair of the Board of Governors of the Federal Reserve (usuallyjust called the “Fed Chair”).What is the situation?As the Fed Chair, you must report to Congress twice each year to inform them about the status of the economy and the current monetary policy plans of the Federal Reserve. You have just reported to Congress that the Fed intends to start following a contractionarymonetary policy.The president is furious! The economy has been growing quickly, and the president intendedto use this fact to gain support for reelection in November. If the Fed starts following a contractionary monetary policy, the economy will slow down, which the president’s opponents could use against the president in the election. You have just received an angry letter

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