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Give a detailed answer to the theoretical question:
Display graphically changes in the equilibrium interest rate if the central bank just increased the policy rate
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- Give a detailed answer to the theoretical question:Display graphically changes in the equilibrium interest rate if the central bank just decreased the policy rate.By using graphs, show and explain each of the following events as either leading to an increase or a decrease in the equilibrium interest rate? a)A decrease in the price level b)An increase in the discount rate c)A decrease in the level of aggregate outputBy using graphs, show and explain each of the following events as either leading to an increase or a decrease in the equilibrium interest rate? d)A sale of government securities by the TCMB f)An increase in the discount rate e)decrease in the level of aggregate output
- If an analyst was considering the effects of interest rates on future direction of the economy, would she focus on the short rates as controlled by the central bank, or long rates as controlled by the market and why?Critically analyze what facts determine the impact of an interest rate change? How effective is monetary policy?Use the following Taylor rule to calculate what would. happen to the real interest rate if the administered interest rate decreases by 1 percentage point. r = p + 0.5y + 0.5(p - 2) + 2
- Which of the following best describes the effect of the zero interest rate policy implemented in December 2008? A) It forced nominal interest rates to below zero. B) Its effectiveness was limited by the zero lower bound problem. C) It had the desired effect, promoting full recovery by 2010. D) It created a surge in inflation.Analyze what will happen to the equilibrium interest rate when discount rate increases and the level of aggregate output increases? Using graphSuppose the Federal Reserve (the Fed) announces that it is lowering its target interest rate by 75 basis points, or 0.75%. It would achieve this by ______the ________. Use the green line (triangle symbols) on the preceding graph to illustrate the effects of this policy. Place the black point (plus symbol) on the graph to indicate the new equilibrium interest rate and quantity of money. The sequence of events that results in a new equilibrium interest rate, after the Fed makes the change you selected, may be described as follows: Because there is__________money in the financial system, there is an excess _________ money at the initial equilibrium interest rate. Individuals and businesses adjust their asset portfolios by _______bonds. As a result, the price of bonds_________ , and the interest rate______ . This process continues until the new equilibrium interest rate is achieved.
- What are called Z factors? Explain how does a change in any of the Z factors lead to a change in interest rate, an instrument of monetary policy?There are four main transmission channels that can be used as monetary policy to target the official interest rate. Identify each of the four transmission channels and explain, within the context of monetary policy, the impact each channel has on economic activity.What is the difference between real vs. nominal interest rates? What is the ‘term structure’ of interest rates? What is the current level of interest rates, and what does the Fed say will happen to interest rates in the near future?
