When the inflation rate increases, what happens to thefederal funds rate? Operationally, how does the Fedadjust the federal funds rate?

Q: What are the purposes of inflation targeting, and howdoes this monetary policy strategy achieve…

A: Meaning of Inflation: Inflation is a sustained and appreciable rise in prices, once started…

Q: What evidence is used to assess the stability of themoney demand function? What does the evidence…

A: The velocity is used as the measure to check whether the demand for money in the economy is stable…

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: Suppose that government spending is increased at thesame time that an autonomous monetary policy…

A: Aggregate Demand (AD) is the economic measure that measures the total amount of demand in the entire…

Q: What are the main determinants of the federal funds rate?

A: Federal funds rate is the rate at which commercial banks borrow from and lend to each other.

Q: Distinguish between the Federal funds rate and the prime interest rate. Why is one higher than the…

A: Federal funds are overnight lending among banking institutions in order to retain the central bank…

Q: In the third quarter of 2020, U.S. GDP was $18,583 while full-employment GDP is an estimated…

A: The central bank controls the short-term interest rate as an operational target through the use of…

Q: What did the Fed do in 2007 to deal with the underutilization) of the discount rate window

A: The 2007 financial crisis began in earlier years with economical credit and lending of tax standards…

Q: What nonconventional monetary policies shift theaggregate demand curve, and how do they work?

A: Nonconventional monetary policy is a series of steps a central bank has taken to put a stop to an…

Q: Many economists are worried that a high level of budget deficits may lead to inflationary monetary…

A: A budget deficit happens when costs surpass income and show the monetary wellbeing of a country. The…

Q: As a member of the FOMC, Write a directive to the committee about the conduct of monetarybpolicy…

A:

Q: How can forward guidance as a tool of the central bankimpact the policy instrument, intermediate…

A: Forward guidance is a tool of central bank monetary policy and is used to change the policy…

Q: Which of the following is a traditional tool used by the Fed during recessions?

A: Fed use various tools to neutralize the effects of fluctuations like boom,recession etc,..

Q: Suppose the and the output gap is 1 percent. Using the Taylor rule, what is the federal funds rate?…

A: The federal funds rate is the target interest rate set by the Fed at which commercial banks borrow…

Q: A columnist in the Wall Street Journal refers to “the fear that central banks are powerless to act…

A: Conventional wisdom says that the policies of the central bank become ineffective when the…

Q: Discuss how the central bank increase the federal funds rate ripples through the different sectors…

A: The economies around the world tend to focus on their growth and development through various…

Q: Inwhat ways might monetary policy be superior to fiscal policy? In what ways might it be inferior?

A: The economy is bagged by two policies that are the monetary and fiscal policies, which are the most…

Q: If central Bank increases money supply at a rate that is higher than before , what will be the…

A: The quantity theory of money: The quantity theory of money supply indicates that money supply and…

Q: What are the similarities between fiscal and monetary policies

A: Government implies both monetary as well as fiscal policy inorder to maintain the economic stability…

Q: Why would it be problematic for a central bank to havea primary goal of maximizing economic growth?

A: A central bank conducts the monetary policies of a country.  It also regulates the commercial banks.

Q: How does inflation targeting help reduce the timeinconsistency problem of discretionary policy?

A: Inflation targeting refers to the setting up of the inflation rate target in the economy. The…

Q: A central bank carries out a contractionary open market operation. (a) What precisely does the…

A: Meaning of Macroeconomics: The term macroeconomics refers to the situation of economic and…

Q: Calculate what the federal funds rate should be using the Taylor Rule

A: The Taylor rule (also known as Taylor's rule or Taylor principle) is an econometric model that…

Q: In what ways does the Fed utilize their monetary policy tools to affect or counter-balance fiscal…

A: Fiscal policy refers to the method of government spending and tax policies to take a control over…

Q: How do the monetary policy tools of the European System of Central Banks compare to the monetary…

A: The Federal reserve bank was established in 1913, under the Federal Reserve Act of 1913. The…

Q: The range within which the federal funds rate can fluctuate is determined by a ceiling of the ______…

A: Here, considering the federal funds rate and its fluctuation, the rate which brings the ceiling is…

Q: The graph below shows the monetary rule curve for the country of HOYA. According to this rule, the…

A: Here, given graph explains the relationship between real federal funds rate and inflation rate in…

Q: Why would a central bank be concerned about persistent,long-term budget deficits?

A: Budget deficits refer to the situation of the government when the expenditure in the economy exceeds…

Q: What action did the FOMC take, if any, regarding the level of the fedfunds rate? Why did it make…

A: The federal funds rate is the central bank's targeted interest rate where the financial institutions…

Q: How would an unexpected change in the equilibriumreal fed funds rate be an argument against using…

A: Answer - Taylor rule :- It is the formula which help fed to how to change the interest rates while…

Q: outline two reasons for a central bank choosing to purse a contractionary monetary policy, and…

A: A central bank may choose to pursue a contractionary monetary policy for a number of reasons. One…

Q: Why is the composition of the Fed’s balance sheet apotentially important aspect of monetary policy…

A: The Central bank plays a dominant role during economic crisis. It implements monetary policy to…

Q: Why are repurchase agreements used to conduct mostshort-term monetary policy operations, rather than…

A: The central bank's strategy on the application of financial tools within its supervision to meet the…

Q: Why is a public announcement of numerical inflationrate objectives important to the success of an…

A: Inflation targeting is central bank policy with an objective of setting inflation rate at a…