Wednesday, February 10, 2016

The FED and Rate Hikes

The article listed below is a great article about the Fed, aggerate demand, wages, and the FOREX market. This is article/video would be great to use for future expectations. In my AP class, I am going to design an FRQ around what is found. I am thinking something along the lines of:

1. The U.S. economy is in full employment.
     a) Draw a correctly labeled Aggregate Supply and Demand graph showing this.
         i) Use Y1 for full employment and PL1 for the price level. 
     b) The world economy begins to slide into recession and is expected to continue into this trend. On the graph you made above, show the result on the US economy because of this. 
          i) Use Y2 for full employment and PL2 for the new price level.
     c) Explain the correct action the central bank should take as a result of your graph in b).
     d) The dollar remains strong, show in the FOREX market what investors would do as a result.
     e) At the same time, energy prices have decreased, show on a new Aggregate Supply and Demand graph the result of this.
     f) Illustrate on a PPF what happens as a result of your previous answer in #4. 

It would need some refinement but goes along with this article. In my CP class, we would walk slowly through what the Fed is doing and how it is supposed to help the U.S. economy.


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