drag on the economy From The Wall Street Journal, Thursday, December 2, 2004: “Janet Yellen, president of the Federal Reserve Bank of San Francisco, said in a speech yesterday at Arizona State...

drag on the economy

From The Wall Street Journal, Thursday, December 2, 2004:

“Janet Yellen, president of the Federal Reserve Bank of

San Francisco, said in a speech yesterday at Arizona State University that

sustained high oil prices, business caution, the growing trade deficit,

consumers’ need to rebuild savings and the waning boost from tax cuts could all

weigh on the expansion and create ‘more opportunities for the Fed to pause‘

But if those drags lift, the Fed could raise rates more rapidly“

With the help of one or more AD-AS diagrams, explain how

each of the factors mentioned by Yellen works to create a drag on the economy

Your answer should include a verbal explanation and graphical depiction for

each factor Be clear about the market linkage