Homework Answers
Answer
Option c) is correct. Inflation; Expected Inflation
Reason:
Inflation targeting is a monetary policy where the central bank sets a specific inflation rate as its goal. The central bank does this to make you believe prices will continue rising. It spurs the economy by making you buy things now before they cost more.
Inflation targeting in principle helps redress this asymmetry by making inflation--rather than employment, output, or some other criterion--the primary goal of monetary policy.
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This Question: 1 pt 10 of 10 (9 complete) The Bank of Canada and the government...
This Question: 1 pt 1 of 10 (2 complete) The Bank of Canada and the government...
This Question: 1 pt 1 of 10 (2 complete) The Bank of Canada and the government of Canada have agreed that the Bank will achieve an inflation rate target. Suppose Parliament legislated interest rate changes. How would you expect the policy choices to change? The most likely result in the short run would be In the long run, the inflation rate would A. an increase in money growth and falling interest rates; fall and nominal interest rates would fall further...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause O A. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. O B. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. O c. a one-time reduction in unemployment, because of a one-time increase in the money...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World War II, empirical economists noticed that, in many advanced economies, as unemployment fell, inflation tended to rise, and vice versa. The inverse relationship between unemployment and Inflation, was depicted as the Phillips curve, after William Phillips of the London School of Economics. In the 1950s and 1960s, the Phillips curve convinced many policy makers that they could use the relationship to pick acceptable levels...
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...
Aa Aa 4. The effect of Bank of Canada action (or inaction) in the AD-AS model Consider the follow...
Aa Aa 4. The effect of Bank of Canada action (or inaction) in the AD-AS model Consider the following graph. The economy is currently producing at point A (grey star symbol), which corresponds to the intersection of the AD1 and SRAS1 curves. The Bank of Canada is considering whether to intervene in an effort to bring the economy back to its potential PRICE LEVEL 180 LRAS SRAS 175 If Bank Intervenes 170 SRAS1 165 160 155 150 AD2 145 140...
For each question, choose the correct response (NO explanation needed!) A1. [10 marks] In the classical...
For each question, choose the correct response (NO explanation needed!) A1. [10 marks] In the classical model, the economy is in long-run equilibrium where the equilibrium inflation rate is equal to the target inflation rate. The economy suffers an adverse supply shock (such as a permanent increase in the price of raw materials). In the new equilibrium: (a) Equilibrium inflation is below the target inflation rate and the government needs to loosen monetary policy to achieve its target. (b) Equilibrium...
1.Suppose the Bank of Canada sells government bonds. Use a graph of the money market to...
1.Suppose the Bank of Canada sells government bonds. Use a graph of the money market to show what this does to the value of money. (6 marks) 2.Using separate graphs, demonstrate what happens to the money supply, money demand, the value of money, and the price level if: a. the Bank of Canada increases the money supply. b. people decide to demand less money at each value of money. 3.Economists agree that increases in the money supply growth rate increases...
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,...
ECON 1150
In the year 2023, aggregate demand and aggregate supply in the fictional country of Gurder are represented by the curves AD2023AD2023 and AS on the following graph.Suppose the natural rate of output in this economy is $6 trillion.On the following graph, use the green line (triangle symbol) to plot the long-run aggregate-supply (LRAS) curve for this economy.LRASOutcome C0246810121416108107106105104103102101100PRICE LEVELOUTPUT (Trillions of dollars)ADAADBAD2023ABASEconomists have forecast that if the government does nothing and the economy continues to grow at the current rate, aggregate demand...
To decrease the money supply, the Bank of Canada could O a) lower the bank rate....
To decrease the money supply, the Bank of Canada could O a) lower the bank rate. O b) lower the required reserve ratio. O c) sell government securities. d) purchase government securities. An increase in interest rate in the economy will have what effect on macroeconomic equilibrium in the long run? a) The price level will rise, and the level of output will fall. b) The price level will rise, and the level of output will be equal to the...
This Question: 1 pt 1 of 10 (2 complete) The Bank of Canada and the government of Canada have agreed that the Bank will achieve an inflation rate target. Suppose Parliament legislated interest rate changes. How would you expect the policy choices to change? The most likely result in the short run would be In the long run, the inflation rate would A. an increase in money growth and falling interest rates; fall and nominal interest rates would fall further...
If the Bank of Canada were to miscalculate the NAIRU (non-accelerating inflation rate of unemployment) as being 10% when in fact it was 12%, it might cause O A. consumers to spend more than they intended, because the Bank of Canada misled them about the unemployment rate. O B. a reduction in the natural rate of unemployment, because it would be allowing inflation to occur. O c. a one-time reduction in unemployment, because of a one-time increase in the money...
1. Is the Phillips curve a myth? Intertemporal tradeoff between inflation and unemployment After the World War II, empirical economists noticed that, in many advanced economies, as unemployment fell, inflation tended to rise, and vice versa. The inverse relationship between unemployment and Inflation, was depicted as the Phillips curve, after William Phillips of the London School of Economics. In the 1950s and 1960s, the Phillips curve convinced many policy makers that they could use the relationship to pick acceptable levels...
Aa Aa 4. The effect of Bank of Canada action (or inaction) in the AD-AS model Consider the following graph. The economy is currently producing at point A (grey star symbol), which corresponds to the intersection of the AD1 and SRAS1 curves. The Bank of Canada is considering whether to intervene in an effort to bring the economy back to its potential PRICE LEVEL 180 LRAS SRAS 175 If Bank Intervenes 170 SRAS1 165 160 155 150 AD2 145 140...
For each question, choose the correct response (NO explanation needed!) A1. [10 marks] In the classical model, the economy is in long-run equilibrium where the equilibrium inflation rate is equal to the target inflation rate. The economy suffers an adverse supply shock (such as a permanent increase in the price of raw materials). In the new equilibrium: (a) Equilibrium inflation is below the target inflation rate and the government needs to loosen monetary policy to achieve its target. (b) Equilibrium...
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,...
To decrease the money supply, the Bank of Canada could O a) lower the bank rate. O b) lower the required reserve ratio. O c) sell government securities. d) purchase government securities. An increase in interest rate in the economy will have what effect on macroeconomic equilibrium in the long run? a) The price level will rise, and the level of output will fall. b) The price level will rise, and the level of output will be equal to the...
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