Federal Reserve and Monetary

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  1. Explain in your own words how your textbook describes the U.S. the Federal Reserve (Fed) uses monetary policy to manage aggregate demand (AD) in the economy. In your response you must discuss (name and describe) at least three tools the Fed uses, how each of those tools affect the money supply, interest rates, and AD.

Hint: Review Table 16.3

2: Read the Kelton/Krugman article linked below and skim through a few of the articles that are linked in its text.

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Kelton and Krugman Debate Article

Summarize the key points in the debate between Krugman and Kelton. Explain how this debate is connected to the textbook explanation of the Fed’s tools and the effectiveness of those tools.

Sample Solution

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