You've Been Asked to Spend a Week or So as the Fed

Essay

You've been asked to spend a week or so as the Fed chairman. It will turn out to be a very interesting week. If your goal is to stabilize inflation and economic activity, what would be your response to these three events? Consider each event individually, independent from the others:
(a) a rapid rise in the stock markets rapidly increases people's wealth;
(b) Chilean citizens get a sudden taste for Buffalo hot wings (they must be made in Buffalo); and
(c) firms begin to grow anxious about the decline in consumer confidence.