A high level of understanding is demonstrated through the ability to teach others. In this assignment you are to assume that you are writing for a high school student that needs you to teach him or her how to analyze the economy using the Aggregate Demand (AD) and Aggregate Supply (AS) Model (ADAS). Be detailed, specific and clear in your double-spaced, word-processed, textual explanations.
Do all the required readings for Module 6 and based on the textbook ADAS Model (which is really an application of the demand/supply model of Micro Chapter 3), answer the following. There is no need to repeat the question as part of your answer – a number followed by an answer will suffice.
1. Research, report, and present the current U.S. Labor Force Participation, Unemployment, and Inflation rates. Given these rates, is the U.S. economy likely experiencing a below, at, or above full-employment macroeconomic equilibrium? Explain using textbook concepts and language.
2. What current events are likely to impact the rates you found in #2? In what specific ways? Why do you believe this? Given, your assumption regarding the current macroeconomic equilibrium described above along with the current events and their impacts you discussed, what action do you recommend the Federal Reserve (Fed) take? Explain fully referring to the specific type of monetary policy the Fed should use. Explain fully referring to the specific monetary policy tool the Fed should use in a “Monetary Policy with Limited Reserves” system. Explain fully referring to the specific monetary policy tool the Fed should use in a “Monetary Policy with Ample Reserves” system.
3. Use the Money Market Model and the ADAS Model to discuss in detail the “chain of events” by which this monetary policy will affect the economy. Start with the monetary policy tool and end with the changes that will happen to GDP, employment, and the price level. Explain using textbook concepts and language.