According to the Taylor rule, If the current infiation rate is 3.2%, output is 1% above the full-employment level, and the central bank's announced inflation target is 2%, at what level should the central bank set the nominal interest rate? Multiple Choice 2.2% 3.3% 4.4%
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- Suppose growth rate of Real GDP is 6% and the growth rate of velocity is 3%. If we wants to have a 5 % inflation rate, what should be the growth rate of money supply according to the predetermined-money-growth-rate-rule?Suppose growth rate of Real GDP is 6% and the growth rate of velocity is 3%. If central bank wants to have a 5 % inflation rate, what should be the growth rate of money supply according to the predetermined-money-growth-rate-rule?According to many studies, in industrialised countries there is strong evidence of a negative relationship between central bank independence and inflation. Explain what are the three limitations to this finding.
- Scenario: The South African Reserve Bank (SARB) left its key repo rate unchanged at a 14-year high of 8.25% during its July 2023 meeting, matching expectations, and marking a pause in its tightening cycle after 10 consecutive rate hikes. However, the Governor noted the decision does not represent the end of the hiking cycle neither that interest rates have peaked, and the next steps will depend on inflation. Policymakers expect lower inflation this year at 6% (vs 6.2%), mainly due to softer food and core prices, although upside risks still hold. Headline inflation fell to 5.4% in June, back to the central bank target of 3%-6% for the first time in 14 months and is forecast to sustainably revert to the 4.5% by the third quarter of 2025. Meanwhile, policymakers raised growth forecast for this year to 0.4% from 0.3% but noticed that energy and logistical constraints continue limiting economic activity and increasing costs. Growth forecast for 2024 and 2025 were kept steady at 1% and 1.1%,…Scenario: The South African Reserve Bank (SARB) left its key repo rate unchanged at a 14-year high of 8.25% during its July 2023 meeting, matching expectations, and marking a pause in its tightening cycle after 10 consecutive rate hikes. However, the Governor noted the decision does not represent the end of the hiking cycle neither that interest rates have peaked, and the next steps will depend on inflation. Policymakers expect lower inflation this year at 6% (vs 6.2%), mainly due to softer food and core prices, although upside risks still hold. Headline inflation fell to 5.4% in June, back to the central bank target of 3%-6% for the first time in 14 months and is forecast to sustainably revert to the 4.5% by the third quarter of 2025. Meanwhile, policymakers raised growth forecast for this year to 0.4% from 0.3% but noticed that energy and logistical constraints continue limiting economic activity and increasing costs. Growth forecast for 2024 and 2025 were kept steady at 1% and 1.1%,…Zimbabwe has experienced several bouts of hyperrinflation over the past decade. Analyse the effectiveness of using traditional monetary policy to reign in hyperinflation such as seen in Zimbabwe.
- Using the quantity theory of money, if inflation is 1%, the velocity of money grows by 1.0% and the growth rate of money is 3.0%; what is the growth rate of output? Group of answer choices 3.0% -3.0% -1.0% 4.0%Name three (3) policy tools that a Central bank can use to constrain the rate of inflation and explain how one (1) of these works in accomplishing its objective.The Bank of Sweden inflation target is 2 % - which is a very common central bank goal. Why is it not zero percent?
- Suppose the statistical office of a country does a poorjob in measuring inflation and reports an annualizedinflation rate of 4% for a few months, while the trueinflation rate has been 2.5%. What will happen to thecentral bank’s credibility if it is engaged in inflation targeting and its target is around 2%?Suppose that the money supply grows at 5 percent. Suppose that real GDP or output grows at 7 percent. According to the Quantity Theory of Money, what should the inflation rate be? Please express your answers as a percentage. Also, make sure to round your answers to the nearest 100th decimal points. For example, write 2.67 for 2.67 percent. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.What is the current federal fund rate using Taylor Rule.The inflation rate is 5%, target inflation rate is 3%, and equilibrium real nterest rate 0.7%, potential GDP $14,000 and actual GDP $15,000.
