Inflation, Unemployment and the Fed Competencies to Master Can identify and explain basic macroeconomic principles Can analyze current macroeconomic and financial news Can research a topic of general interest and summarize findings in writing Can read critically in order to identify main ideas, supporting evidence, and conclusions Overview You have been hired as an economic advisor to Peter Politico, who is running for U.S. Congress. Unfortunately, Mr. Politico does not know very much about economics. You have been asked to write a briefing to prepare him for a debate about the role of the Federal Reserve (“the Fed”) in controlling unemployment and inflation. Directions To prepare to write your briefing, explore the resources to make sure you understand all the concepts that will come up in the debate. The Project Resources explaining these concepts are listed in the order you should review them. Also, read the two articles about the Federal Reserve. Write a briefing that explains to Mr. Politico the important background concepts in a way that someone without knowledge of economics can understand. Structure your briefing in the following way: Begin by explaining the background concepts of: · real GDP · inflation · unemployment Explain the concepts of aggregate supply and aggregate demand, including recessionary and inflationary gaps. Explain what the Fed does. Use the background concepts in your explanation. · What is the Fed’s “dual mandate”? · What tools does the Fed use to achieve its goals? · What happens when the Fed pursues an expansionary or contractionary policy? To provide Mr. Politico with two specific examples of how the Fed works, summarize the two news articles. For each, explain the main ideas presented, the evidence given for these ideas, and the conclusions. Throughout the briefing, you will need to translate any economics jargon into simple, clear language for Mr. Politico. Look up any concepts that you don’t understand to help your analysis and be sure to use your own words as you write this briefing.