Expectations for a rate cut will fade as coronavirus fear eases.
Questions
- Why does the Federal Reserve believe that current interest rates are “probably appropriate”?
According to the St. Louis Fed President, there’s a high probability that the coronavirus will be a temporary shock. Suppose he is wrong.
- Is an interest rate cut an appropriate response to a pandemic? Why or why not?
- Does a pandemic influence aggregate supply in both the short run and the long run?
- What fiscal policy would you suggest the government implement in response to a pandemic?
- Draw a graph to illustrate your answers to #3 and #4.