M&B3 3rd Edition by Dean Croushore

تمرين 7

A new Fed governor argues during FOMC meetings that the Fed has not suffi ciently achieved the goal of helping the economy reach its potential level of output. She asks the committee to be more aggressive, using expansionary monetary policy to increase the growth rate of output. What are the likely consequences of such a policy Illustrate your answer using the expectationsaugmented Phillips curve.