The price of producing synthetic rubber shoes shoots

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Reference no: EM13837782

The price of producing synthetic rubber shoes shoots up 15%, raising the price of the typical athletic shoe 15%. What should the Fed do? (Some what of a trick question. You need to determine if this is a macro or micro issue.)

1. Should the Fed buy or sell bonds, if any, through open market operations?

2. Is your choice an easy or tight monetary policy?

3. Describe the effect on Aggregate Demand (AD) and GDP.

4. What would be the probable effect on interest rates, inflation, and unemployment?

Reference no: EM13837782

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