Homework Answers
Add Answer to:
Problem #12 Imagine that in a given economy the central bank follows a variant of the...
Suppose the central bank, instead of following the rule r = r(Y,π), has a target level...
Suppose the central bank, instead of following the rule r =
r(Y,π), has a target level of inflation. Specifically, it sets r
according to r = rLR + b[π − π*]. Here rLR is the real interest
rate when the economy is in long-run equilibrium; that is, it is
the real interest rate that causes the loan market to be in
equilibrium when Y = �Y. In addition, π* is the central bank’s
target level of inflation, and b is...
As the text explains, “in practical terms central banks set their short-term [key policy] interest rate...
As the text explains, “in practical terms central banks set their short-term [key policy] interest rate instrument based on their inflation target and their assessment of current and future economic conditions. This approach is described by [the Taylor] policy rule for setting the [key policy] interest rate.” The Taylor Rule is given as follows: i = i0 + ∝ (π- π*) + β [(Y- Yp)/Yp] i. how this “Taylor Rule” responds to where, (1) the current rate of inflation, π...
6. 7. Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
6. 7. Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
5. Consider the following modification of the DAS and DAD model in class. a) Suppose the...
5. Consider the following modification of the DAS and DAD model in class. a) Suppose the monetary-policy rule has the wrong natural rate of interest. That is, the central bank follows this rule: where ρ, does not equal p, the natural rate of interest in the equation for goods demand. The rest of the dynamic AD-AS model is the same as in the textbook. Solve for the long-run equilibrium under this policy rule. (5pts) Suppose that the shock et were...
please answer Question 7: Inflation targeting and the Taylor rule in the IS-LM model Consider a...
please answer Question 7:
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation,...
6.The Aggregate Demand (AD) curve is obtained by combining: (a) The consumption function, planned investment and...
6.The Aggregate Demand (AD) curve is obtained by combining: (a) The consumption function, planned investment and the central bank's policy reaction function. (b) The consumption function and the Taylor rule. (c) The equation for PAE, the central bank's policy reaction and Y = PAE. (d) Y=PAE and the consumption function. (e) The equation for planned investment and the central bank policy reaction function. 7.The AD curve is generally assumed to have a negative slope. However, which of the following would...
14) Suppose the AE curve is mis-measured such that the Central Bank under- estimates the effects...
14) Suppose the AE curve is mis-measured such that the Central Bank under- estimates the effects of interest rates on expenditure. The economy starts off at Y* and TT and then experiences an adverse supply shock. The Central Bank follows non-accommodative policy using the incorrectly measured AE curve. For simplicity assume there are no lags. This leaves the economy in which of the following states? a) Recession; inflation above target b) Recession; inflation below target c) Expansion; inflation above target...
As the text explains, "in practical terms central banks set their short- term [key policy) interest...
As the text explains, "in practical terms central banks set their short- term [key policy) interest rate instrument based on their inflation target and their assessment of current and future economic conditions. This approach is described by [the Taylor] policy rule for setting the [key policy) interest rate." The Taylor Rule is given as follows: i = 10 + < (TT- T*) + B [(Y- Yp)/Yp] i. Explain carefully how this "Taylor Rule" responds to where, (1) the current rate...
Section B: Short-answer Questions Answer BOTH Questions 21 and 22. You are expected to provide written...
Section B: Short-answer Questions Answer BOTH Questions 21 and 22. You are expected to provide written explanations for all your answers in the script book. Question 21 (15 marks) Assume that before the changes, the economy was at the natural level of output and the central bank uses an interest rate rule with a price level target. (a) Show the effects of a reduction in consumer confidence on the position of the AD/AS and IS/LM curves in the short and...
Suppose the central bank, instead of following the rule r =
r(Y,π), has a target level of inflation. Specifically, it sets r
according to r = rLR + b[π − π*]. Here rLR is the real interest
rate when the economy is in long-run equilibrium; that is, it is
the real interest rate that causes the loan market to be in
equilibrium when Y = �Y. In addition, π* is the central bank’s
target level of inflation, and b is...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
6.
7.
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation, and Yn...
5. Consider the following modification of the DAS and DAD model in class. a) Suppose the monetary-policy rule has the wrong natural rate of interest. That is, the central bank follows this rule: where ρ, does not equal p, the natural rate of interest in the equation for goods demand. The rest of the dynamic AD-AS model is the same as in the textbook. Solve for the long-run equilibrium under this policy rule. (5pts) Suppose that the shock et were...
please answer Question 7:
Inflation targeting and the Taylor rule in the IS-LM model Consider a closed economy in which the central bank follows an interest rate rule. The IS relation is given by Y C(Y- T) I(Y,r) G Where r is the real interest rate. The central bank sets the nominal interest rate according to the rule i = i* + a(n° =- T*) + b(Y- Y1) Where T is expected inflation, T* is the target rate of inflation,...
14) Suppose the AE curve is mis-measured such that the Central Bank under- estimates the effects of interest rates on expenditure. The economy starts off at Y* and TT and then experiences an adverse supply shock. The Central Bank follows non-accommodative policy using the incorrectly measured AE curve. For simplicity assume there are no lags. This leaves the economy in which of the following states? a) Recession; inflation above target b) Recession; inflation below target c) Expansion; inflation above target...
As the text explains, "in practical terms central banks set their short- term [key policy) interest rate instrument based on their inflation target and their assessment of current and future economic conditions. This approach is described by [the Taylor] policy rule for setting the [key policy) interest rate." The Taylor Rule is given as follows: i = 10 + < (TT- T*) + B [(Y- Yp)/Yp] i. Explain carefully how this "Taylor Rule" responds to where, (1) the current rate...
Section B: Short-answer Questions Answer BOTH Questions 21 and 22. You are expected to provide written explanations for all your answers in the script book. Question 21 (15 marks) Assume that before the changes, the economy was at the natural level of output and the central bank uses an interest rate rule with a price level target. (a) Show the effects of a reduction in consumer confidence on the position of the AD/AS and IS/LM curves in the short and...
Most questions answered within 3 hours.
-
Which test is used for independent data?
A. wilcoxon signed-rank test
B. wilcoxon rank sum test...
asked 1 minute ago -
we
wish to estimate what percentage of adult residence in a certain
county are parents. out...
asked 18 minutes ago -
How do I calculate the kf for cyclohexane (pure
solvent)?
Also how to calculate the mass...
asked 17 minutes ago -
Alomar Co., a consolidated enterprise, conducted an impairment
review for each of its reporting units. In...
asked 18 minutes ago -
Write a public static method named
getMaxOf2Ints that takes in 2 int arguments and
returns the...
asked 42 minutes ago -
How will manager's behaviour change towards team members
as there would be a more cordial relationship...
asked 47 minutes ago -
You may need to use the appropriate appendix table or technology
to answer this question.
Consider...
asked 1 hour ago -
The U.S. textile industry has had difficulty competing with
foreign imports in the past. If the...
asked 54 minutes ago -
A reaction that produces ammonia is shown below. How does the
catalyst used in the industrial...
asked 1 hour ago -
JAVA CODE Beginner. please use if, else if or switch
statements, but don't use arrays, please ...
asked 58 minutes ago -
On December 1, Year 1, Bradley Corporation incurs a 15-year
$200,000 mortgage liability in conjunction with...
asked 1 hour ago -
- Perform Add round Key operation for the below
input =
A1
10
24
57
1F...
asked 1 hour ago