[Related to Solved Problem 15.4 on page 537] Use the graph in the next column to answer the following questions. a. If the Fed does not take any policy action, what will be the level of real GDP and...

[Related to Solved Problem 15.4 on page 537] Use

the graph in the next column to answer the following

questions.

a. If the Fed does not take any policy action, what will be

the level of real GDP and the price level in 2021?

b. If the Fed wants to keep real GDP at its potential level

in 2021, should it use an expansionary policy or a

contractionary policy? Should the trading desk be

buying Treasury bills or selling them?

c. If the Fed takes no policy action, what will be the inflation rate in 2021? If the Fed uses monetary policy to

keep real GDP at its potential level, what will be the

inflation rate in 2021?