The Monetary Policy of the Nation of Collegeville

ASSESSING THE CURRENT STATE OF THE ECONOMY1. What is the current unemployment rate in Collegeville? (15 points)2. Is the economy currently performing below, or above full employment? How can you tell? (10 points)3. Which of the following images best represents the current state of the economy? (10 points)4. Which type of Monetary Policy would you expect in this situation? (10 points)5. Once the policy takes effect, describe the impact of such a policy on; a) Interest Rates b) Return on Stocks, if these values change (up or down) exactly by 2%. In other words, what is the new interest rate, the new rate of return on stocks? (15 points)6. Using interest rates of 5% (old level), how much will you have in 14 years, if you keep the $20,000 in the Money Market account? (15 points)7. Given the Monetary policy that you expect will take place and the corresponding new rate of interest, if you keep your funds in the money market account, do you expect to have more or less money (compared to your answer in the previous question) at the end of 14 years? Explain your rationale (15 points)8. If you could reallocate your money before the monetary policy takes effect, would you lean towards buying stocks? Explain your rationale by stating what you think will happen to the economy in the short run as the policy is implemented. As part of your explanation, describe how you applied at least one of the following concepts: value, risk, return, liquidity, diversification and the Rule of 70. Consider before and after (the policy takes effect) outcomes. (10 points)