Question

Answer the following questions as thoroughly and clearly as possible.

1. Regarding the structure of the nation's central bank - the Federal Reserve. Its primary policy-making body is the Federal Open Market Committee or the FOMC. How many members does the FOMC consist of?

2. When the economy is said to be fully employed, which type of unemployment no longer exists anymore?

3. What are the two types of inflation?

4. Define Stagflation. And which type of the two inflation would usually result in a stagflation?

5. Under what scenario would the government officially confirm that the economy is in a "recession?"

6. What are the four phases of an economy's business cycle?  

7. What should fiscal policymakers do to slow the economy down?

8. What are the four types of limited resources as described in Chapter 1(just the intro to macroeconomic)?

Answer 1

1. There are twelve members in the Federal Open Market Committee (FOMC) of which the seven members come from the Federal Reserve System (from Board of Governors), the Federal Reserve Bank of New York president and four from the eleven presidents of Reserve Bank (each serving term of one year on a basis of rotating).
2. When all available labor resources get employed in the most possible proficient means, it is termed as full employment. Cyclical or deficient-demand unemployment no longer exists during the course of full employment.
3. The two types of inflation of inflation:

• Demand-pull inflation: Demand of more goods and services than offered or supplied. There is more income and strong consumer demand.
• Cost-push inflation: It occurs when fewer goods can be produced due to the rise in production costs and thus the demand for goods increases.