If real GDP is $18.9 Trillion, potiental real GDP is $18.8 Trillion, and the current inflation rate is 4.2%, what is currently happening in the economy and what FED response is expected?
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- Based on the below, what is currently happening in the economy and what FED response is expected? If real GDP is $18.9 trillion potiental real GDP is $18.8 Trillion current inflation rate is 4.2%Suppose the current inflation rate is 5.8%, real gdp is $22.5 trillion and potential real gdp is $22 trillion. What is happening in the economy and what sort of Fed response would be expected?Assume the inflation rate is 6% and there is every indication that price levels will continue to rise. The Fed should engage in which policy with respect to open market operations: Buy bonds Sell bonds. Increase reserve ratio Decrease reserve ratio
- 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.The money supply in Freedonia this year is $150 billion. Nominal GDP is $750 billion and real GDP is $250 billion. Assuming that velocity of money is stable, real GDP grows by 2% this year, and the money supply does not change. What are the velocity, price level, and inflation rate this year?Economics Suppose that the income elasticity of money demand is 0.4. Nominal interest rates do not change over time. If money supply increases by 20% every year, while real income only increases by 1%, what is the inflation rate?
- Suppose real GDP is forecasted to grow by 2.482.48%, the velocity of money has been stable, and the Fed announces an inflation target of 3.303.30%. What is the largest money growth rate the Fed could implement and still achieve its inflation target?The money supply of a country has been growing for many years causing expected inflation of 8% per year. The economy’s current GDP growth rate is 1%. The Central Bank’s estimate of long term GDP growth rate is 3%. The “real” interest rate, r, is 4%. If the Central bank follows the Friedman rule policy, how fast should it grow the money supply? (answer should be an integer reflecting the %)(A) If real GDP is growing by 3% a year, what should the Fed do to the money supply to keep prices constant? Assume velocity is constant. If velocity is constant and nominal GDP increases by 5% what is happening to the money supply?
- The money supply of a country has been growing for many years causing expected inflation of 8% per year. The economy’s current GDP growth rate is 1%. The Central Bank’s full employment target GDP growth rate is 5%. The “real” interest rate, r, is 4%. Following a policy that targets only inflation, with speed of adjustments ay =0 and aπ = 0.5, where 6% is the new target inflation rate what should their target nominal interest rate be set at?Explain the FED role to cope with rising inflation.What happens to nominal GDP if the money supplygrows by 17% but velocity declines by 24%?