If the economy is able to self-correct from a negative GDP gap, why might the Fed wish to intervene in the market?

Q: Show graphically that the less responsive is investment to interest rates, the less effective is…

A: Answer -

Q: How might the credibility of the Fed’s commitment to reduce inflation affect the sacrifice ratio?

A: Sacrifice ration is the number of percentage points of annual output lost in the process of reducing…

Q: If the central bank desired to increase spending in the economy, using the instruments ofmonetary…

A: Monetary policy is used by the federal reserves also known as the central bank of an economy to…

Q: Empirical evidence show that monetary policy may not always be successful in pulling an economy out…

A: Monetary policy is that the micro  economy policy ordered down by the financial organization. It…

Q: If the Fed is following the "benchmark Taylor Rule", and the equilibrium real interest rate is 4%,…

A: Taylor rule: R = r* + π + 0.5 * (π - π*) + 0.5 * (Output gap) where, R = nominal federal funds rate…

Q: Describe the Fed’s monetary policy actions over the course of the  2020 year and  identify whether…

A: Considering the impacts of COVID-19 on financial action and on dangers to the viewpoint, the FOMC…

Q: If a Central Bank decides it needs to decrease both the aggregate demand and the money supply, then…

A: Central bank can able to increase and decrease money supply with the help of various tools like…

Q: employment and low inflation

A: The Phillips curve depicts the relationship between the inflation rate and unemployment rate. It…

Q: explain why does The Fed have a better chance of fixing a recession caused by a drop in spending…

A:

Q: The president needs to make any changes to the economy through the Fed?? True or False

A: In any economy, two types of polices are implemented to influence the economy. The two polices are…

Q: Suppose the actual inflation rate is 3 percent points, the Fed's inflation target is 4 percent…

A: Given the actual inflation = 3% Target inflation = 4% Unemployment is 1% below the target…

Q: Describe the cornerstone of monetary policy?

A: Monetary policy is the tool for the central bank(CB) of any economy to tackle some situations where…

Q: When a central bank has driven down short-term nominal interest rates to nearly zero, the monetary…

A: A zero-bound rate of interest is a reference for short-term rates of interest to the lower limit of…

Q: Why is there a lag between the Fed’s actions and the economy’s response?

A: In the behaviour of the Fed and the response of the economy, there is a time lag. The point of touch…

Q: What specific monetary policy tools would you use to stimulate aggregate demand and how?

A: Monetary policy tools use to stimulate aggregate demand:To stimulate the aggregate demand, the…

Q: the amount of inflation caused by expansionary monetary policy depends on the slope of the supply…

A: Inflation: - Inflation is the phenomenon of an increase in the prices of goods and services in an…

Q: When economy has recovered from deep recession from zero-lower-bound, there is no risk of using…

A: Zero-bound is an expansionary monetary policy instrument where a national bank brings transient…

Q: Why does the Fed manipulate the money supply ? Why might a price "freeze" help monetary policy to…

A: The Fed is the main authority which manipulates the money supply in the economy because it initiates…

Q: are open market operations the most important tool that the Fed has to help stabilize the economy?

A: Monetary policy: Monetary policy is the tool in the hands of the central bank of a country which…

Q: Monetary policy actions by the Fed are

A:

Q: Assume the economy is currently in Recession and the Federal Reserve has chosen to use the required…

A: Economy is going through a recession path and Federal Reserve can able to solve the situation by…

Q: Suppose that government spending is increased at the same time when an autonomous monetary policy…

A: The aggregate supply is the total amount of services and commodities that firms in an economic plan…

Q: Are you concerned about the inflation come back due to such easy monetary policy with zero interest…

A: The pace at which prices keep rising over a certain amount of time is referred to as…

Q: The fed controls the prime interest rate? True or False

A: Fed is the central bank of the Unites States of America.  The functions of Fed includes: (i)…

Q: How does an autonomous tightening or easing ofmonetary policy by the Fed affect the MP curve?

A: With an easing of monetary policy, some changes which are projected in monetary policy independent…

Q: What methods can be used by the FED to influence interest rates? Are these methods effective?

A: Please find the answer below.

Q: )Use the theory of liquidity preference to explain how a decrease in the money supply affects the…

A: As per liquidity preference theory, interest rate is a tool which is used for adjusting or balancing…

Q: The Fed can directly affect long-term interest rate by setting the policy rate target range. True or…

A: In the United States, Federal Reserve is the highest monetary authority to make decisions related…

Q: In 2008 the Fed reduced both the discount and federal fund rates dramatically.  But bank loan volume…

A: A drop-in discount rate encourages banks to lower the rate of interest they charge on loans. Due to…

Q: Explain in detail how policy rate affects aggregate demand through a monetary transmission…

A: Policy rate means interest rate.Interest rate changes can affect aggregate demand through monetary…

Q: Explain the logic according to liquidity preference theory by which an increase in the money supply…

A: Liquidity preference theory accepts the financing cost changes with bring the currency market into…

Q: The only one interest rate in the economy the Fed can control directly is the FFR. True False

A: Federal Fund Rates (FFR): It is the interests that the commercial banks charges to lend and borrow…

Q: What is the Taylor rule? how a central bank may follow the Taylor rule to conduct monetary policy?

A: Taylor’s rule refers to a forecasting model essentially used to define the interest rates that will…