Identify the source of shock and the effects on in?ation

Reference no: EM133295122

Assignment:

Question: IS, MP and Philips Curve

You have been asked to spend a week as the Fed chairman. It will turn out to be a very interesting week with two separate events listed below. For each of the events7 Identify the source of the shock, the appropriate reaction of the Federal Reserve, and the effects on in?ation. Consider each event individually, independent from the others. You may assume that the economy was initially at its potential output.

(i) A rapid rise in the stock markets rapidly increases people's wealth.

(ii) Chilean citizens get a sudden taste for Buffalo chicken wings (they must be made in Buffalo, New York).

Reference no: EM133295122

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