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In a speech, titledRecent Economic Developments, Monetary Policy Considerations and Longer-Term Prospects(Links to an external site.), in June 2016, Jerome Powell, a member of the Federal Reserve’s...

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In a speech, titledRecent Economic Developments, Monetary Policy Considerations and Longer-Term Prospects(Links to an external site.), in June 2016, Jerome Powell, a member of the Federal Reserve’s Board of Governors, then, stated that the fraction of the U.S. population aged 25 to 54 who were working or actively looking for work “is now below those of most other advanced economies, including the U.K., France and Germany, for example” (para. 7). He also stated, “I am inclined to believe that there are potential workers at the margins of the labor market who will return as the recovery continues” (para. 7). Evaluate Powell’s two statements, and explain how the two statements are related. Why is it important for the Federal Reserve to accurately estimate how many people might still be brought back into the labor market as economic recovery continues? Why might it be difficult for the Federal Reserve to make such estimates? What potential policy errors might the Federal Reserve make if its estimates are inaccurate? Use the AD-AS model/graph to demonstrate your responses.

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Answered Same Day May 29, 2021

Solution

Komalavalli answered on Jun 05 2021
141 Votes
As recovery of economic growth continues it is necessary for the federal reserve to estimate accurately how many people still be
ought back into the labour market because when unemployed person get job and no one left in the job market without job that is when the nation reaches it full employment level, continued economic growth will be met with the pressure of inflation. There are 2 main goals for the federal government, they are to maintain inflation at 2% level because too much of inflation will lead to affect the economy and...
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