Unemployment for the last 6 months has been around the 4.0% mark. Although, energy and food prices have been fluctuating up and down, the overall inflation rate has remained constant at a 20 year low of 2.0%. Car sales and durable good sales are rising at a moderate but steady rate. Retail sales are increasing briskly at a 4% annual rate. GDP is rising at about 4% per quarter, according to the latest data. Housing sales are rising at a moderate rate. Housing prices are about the same as they were a year ago. Inventories are at desired the level. The natural rate of unemployment is considered to be 4.0%. Answer the following questions below:
1. The problem in the economy, if any (Describe from the information given in the paragraph, why you chose that particular problem).
2. The monetary and fiscal policy to be used;
3. The tools of the policy and how they work to correct the problem;
4. Any undesirable consequences that may arise when the Fed and/or the federal government implement the policy.
5. In your discussion please discuss the branch of the government that will implement each of these policies (Federal government or Federal Reserve).
