My question is below, along with documents needed to answer the question. Choose an answer choice (A, B, C, or D). Thank you!

My question is below, along with documents needed to answer the question. Choose an answer choice (A, B, C, or D). Thank you!

Now consider the data for 2018-19, the Federal Reserve statement, and the Wall Street Journal articles. They are included on the worksheet linked in the Module 3 Assignments page.

Let’s set the scene. Which of the following best describes the economy as of February 2019? (It might help to draw the goods and money market diagrams.)

a.Unemployment is historically low, and output is above potential. Consumption spending is growing, though the moderation of investment spending growth has slowed the rise in aggregate demand. Fiscal policy is adding from aggregate demand growth. In this situation inflation is a threat, and the inflation rate is beginning to rise. So far the interest rate spread has not responded to the Fed’s monetary policy, so the Fed plans to continue to increase the federal funds rate in 2019.

b.Unemployment is historically low, and output is below potential. Consumption and investment spending have moderated, and the contractionary fiscal policy is reducing aggregate demand. In this situation inflation is a threat, and the inflation rate is beginning to rise. So far the interest rate spread has not responded to the Fed’s monetary policy, so the Fed plans to continue to increase the federal funds rate in 2019.

c.Unemployment is historically low, and output is above potential. Consumption spending is growing, though the moderation of investment spending growth has slowed the rise in aggregate demand. Fiscal policy is adding to aggregate demand growth. In this situation inflation is usually a threat, but so far inflation has not increased. The interest rate spread has responded to monetary policy, so the Fed has decided to stop increasing the federal funds rate for now.

d.Unemployment is historically low, and output is below potential. Consumption and investment spending have moderated, and the contractionary fiscal policy is reducing aggregate demand. In this situation inflation is usually a threat, but so far inflation has not increased. The interest rate spread has responded to monetary policy, so the Fed has decided to stop increasing the federal funds rate for now.

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