Homework Answers
Gold price targetting rule is not a monetary policy rule
K percent rule, money targetting, unemployment rate targetting, inflation targetting all are included in monetary policy
Option C is correct.
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Of the following, which is NOT a monetary policy rule the Fed could follow? A. a...
If you were the Federal Reserve chairman, which monetary policy would you advise the federal government...
If you were the Federal Reserve chairman, which monetary policy would you advise the federal government to adopt? Explain why. o Return to the classical gold standard o A gold price targeting policy o A monetary rule (i.e., increase the M2 money supply at a steady rate equal to the long-term real GDP growth rate, and allow interest rates to fluctuate without interference. o Price inflation target, i.e., set a maximum price inflation target, based on the Consumer Price Index...
Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should...
Suppose the Fed wanted to engage in an expansionary monetary policy. Which of the following should it do? a. Increase the reserve requirement ratio. b. Buy bonds on the open market. c. Sell bonds on the open market. d. Lower taxes. e. Increase the discount rate. The interest rate at which banks can borrow funds from the Fed is known as… a. the federal funds rate. b. the discount rate. c. the prime rate. d. the real interest rate. e....
When the Fed changes monetary policy to reduce the rate of inflation, which of the following...
When the Fed changes monetary policy to reduce the rate of inflation, which of the following should occur in the medium run? (A) The AD curve should shift to the right. (B) The IA line should shift down. (C) The AD curve should shift to the left. (D) The IA line should shift up.
20. Impact of Inflation Targeting by the Fed Assume that the Fed adopts an inflation targeting...
20. Impact of Inflation Targeting by the Fed Assume that the Fed adopts an inflation targeting strategy. Describe how the Fed's monetary policy would be affected by an abrupt 15 percent rise in oil prices in response to an oil shortage. Do you think an inflation targeting strategy would be more or less effective in this situation than a strategy of balancing inflation concerns with unemployment concerns? Explain.
Since monetary policy changes through the fed funds rate occur with a lag, policymakers are usually...
Since monetary policy changes through the fed funds rate occur with a lag, policymakers are usually more concerned with adjusting policy according to changes in the forecasted or expected inflation rate, rather than the current inflation rate. In light of this, suppose that monetary policymakers employ the Taylor rule to set the fed funds rate, where the inflation gap is defined as the difference between expected inflation and the target inflation rate. Assume that the weights on both the inflation...
Since monetary policy changes through the fed funds rate occur with a lag, policymakers are usually...
Since monetary policy changes through the fed funds rate occur with a lag, policymakers are usually more concerned with adjusting policy according to changes in the forecasted or expected inflation rate, rather than the current inflation rate. In light of this, suppose that monetary policymakers employ the Taylor rule to set the fed funds rate, where the inflation gap is defined as the difference between expected inflation and the target inflation rate. Assume that the weights on both the inflation...
According to activists, which of the following would be an appropriate monetary policy action for a...
According to activists, which of the following would be an appropriate monetary policy action for a period of unemployment? Select one: a. a reduction in government spending b. the purchase of government securities by the Fed c. an increase in the reserve requirement d. a reduction in the tax rate on personal income e. an increase in the discount rate
a. What does the Taylor Rule imply that monetary policymakers should due to the Federal Funds...
a. What does the Taylor Rule imply that monetary policymakers should due to the Federal Funds Rate under the following scenarios? Please explain your answer using the information in the Taylor Rule. (Hint: you may want to start with the equation for the Taylor Rule.) The Taylor Rule: 1. Unemployment rises due to a recession. 2. An oil price shock causes the inflation rate to rise by 1% and output to fall by 1%. 3. The Fed decreases its target...
The following table shows two monetary policy rules. Inflation Policy Rule 1 Targeet Overnight Rate Policy...
The following table shows two monetary policy rules. Inflation Policy Rule 1 Targeet Overnight Rate Policy Rule 2 Target Overnight Rate 0 1 3 2 3 5 4 5 7 6 7 9 8 9 11 a. Graph the two policy rules. Suppose the Bank of Canada shifts from policy rule 1 to policy rule 2. b. For any given rate of inflation, what happens to the interest rate because of this change in policy? What happens to the...
Maintaining the growth of the money supply at a constant rate is an example of a...
Maintaining the growth of the money supply at a constant rate is an example of a A. discretionary policy. B. the gold standard. C. an inflation targeting rule. D. a money demand rule. E. a money targeting rule.
20. Impact of Inflation Targeting by the Fed Assume that the Fed adopts an inflation targeting strategy. Describe how the Fed's monetary policy would be affected by an abrupt 15 percent rise in oil prices in response to an oil shortage. Do you think an inflation targeting strategy would be more or less effective in this situation than a strategy of balancing inflation concerns with unemployment concerns? Explain.
Since monetary policy changes through the fed funds rate occur with a lag, policymakers are usually more concerned with adjusting policy according to changes in the forecasted or expected inflation rate, rather than the current inflation rate. In light of this, suppose that monetary policymakers employ the Taylor rule to set the fed funds rate, where the inflation gap is defined as the difference between expected inflation and the target inflation rate. Assume that the weights on both the inflation...
Since monetary policy changes through the fed funds rate occur with a lag, policymakers are usually more concerned with adjusting policy according to changes in the forecasted or expected inflation rate, rather than the current inflation rate. In light of this, suppose that monetary policymakers employ the Taylor rule to set the fed funds rate, where the inflation gap is defined as the difference between expected inflation and the target inflation rate. Assume that the weights on both the inflation...
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