Suppose a consumer’s utility function is given by: U(x1, x2 ) = x1 0.4*x2 0.6 a) What is the consumer’s demand for x1 as a function of income and
September 3, 2020
Suppose that the profit a Honda dealership makes on selling an Accord is random and is given by the following probability distribution:
September 3, 2020

Hi, can you please help me with the questions below? I need an full answer not just few sentences.

1. In establishing its monetary policy priorities, the Federal Reserve always has to take into account 1) the economic and social costs of inflation and 2) the economic and social costs of unemployment. What are these economic and social costs? Fully explain – 15 points. (Hint: if you want to get rid of unemployment you need to increase inflation)

2. If you were advising the President of the US and the Chair of the Federal Reserve, what monetary policy, fiscal policy or alternative policy actions (if any) would you advise them to take to stimulate the economy and reduce unemployment. Fully explain your reasons for each policy or alternative action proposed ( or for why you believe no new actions need be taken) – 15 points.

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