Which of the following is true of Advantages of the US implicit Nominal Anchor? Select one: a. The Fed’s forward-looking behavior and stress on price stability also help to discourage overly expansionary monetary policy, thereby ameliorating the time consistency problem. b. It does not enable monetary policy to focus on domestic considerations. c. It relies on a stable money-inflation relationship. d. None of the above
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- 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%,…Continuing to work with a 2% inflation target, a 1999 version of the Taylor Rule and an initial nominal policy rate of 1.5%, now consider the impact of including a variable risk premium that is typically positive, meaning that the market interest rate is usually above the central bank policy rate. In the following questions, assume the normal (natural) risk premium is 100bp, the economy has a negative output gap (minus 1%), the actual risk premium is 300bp, the economy’s natural real market interest rate is 2% and that both actual and expected inflation is 1%. 5a) what nominal policy rate would you recommend? 5b) what is the natural nominal policy interest rate? 5c) how does the new market real interest rate compare with its initial level? 5d) what nominal policy rate would the Taylor Rule recommend if the negative output gap then widened to minus 2% and both current and expected inflation fell to zero? (other factors, including the risk premium remaining unchanged)
- The Bank of Zambia has introduced the monetary policy rate {MPC) initially set at 9.0% and which has since moved up to 15.5% as of may 2016. a. What is the purpose of the monetary policy rate and what factors are considered in its determination? b. what are the reasons for the introduction of the policy rate, highlighting both the merits and demerits of this measure and the significance of the policy rate in relation to other monetary policy measures? c. Discuss the implications of the increase in the policy rate from 9.0 to 15.5 % on the financial market and on the Zambian economy in general. What factors may have prompted the increase and what is the likely direction of the movements in the rate going into the second half of 2016? What factors are likely to weigh on the movements?The economy of Macro Island is described by the quantity equation with constant velocity. All residents of Macro Island understand the quantity theory and use it to form their expectations of inflation. Real income grows at a steady 2 percent per year, and the nominal interest rate is 5 percent. In one year, people had expected the money supply to grow by 4 percent, but in fact it grew by only 3 percent. a. What was the inflation rate? (3% 4% 1% 2%) b. What was the expected inflation rate? (1% 4% 3% 2%) c. What was the ex ante real interest rate? (4% 2% 1% 3%) d. What was the ex post real interest rate? (2% 1% 4% 3%) e. Did the deviation of inflation from what was expected hurt creditors or debtors? ( Creditors Debtors)According to the classical theory of money, inflation does not make workers poorer because wages increase: Select one: a. faster than the overall price level. b. more slowly than the overall price level. c. in proportion to the increase in the overall price level. d. in real terms during periods of inflation.
- 2 Discuss the short-run and medium-run effects of an decrease in the price of oil. What should the reserve bank do in order to stabilize the inflation rate? Illustrate your answer on a IS-LM-PC model (with horizontal LM).Consider the following expressions: π = πe + ε(un − u) (1) L(u,π) = a(u − un) + π2 (2)1) Assign a label to expression (1) and (2) and interpret them in detail.2) Utilizing expression (1) and (2) find the optimal level of inflation under discretionary monetary policy outlook. Also interpret the derived value.Supposed the economy is faced with persistently rising prices and there is a real threat of a worsening inflation. What specific actions/policy can the Central Bank implement to curb this threat and why? Based on the IS-LM model, if the Central Bank does this, which curve will shift and in what direction? Predict the effects of the Central Bank action on the following: Income: ________________ Interest Rate: ____________ Consumption: ___________ Investment: ______________
- "Consider an economy experiencing stagflation, characterized by high unemployment and high inflation. Traditional monetary policy suggests that addressing inflation often leads to higher unemployment, and vice versa. In this context, critically evaluate the effectiveness of non-traditional monetary policy tools such as quantitative easing (QE) and negative interest rates. Discuss how these tools can be used to address stagflation, considering their potential impacts on both inflation and unemployment. Additionally, analyze the risks and limitations of these tools in the context of potential long-term economic repercussions, such as asset bubbles and distorted credit markets." Don't use chatgpt or other ai tool If you gave wrong answer and ai answer I will give you dislike.There are so many macroeconomic problems which appear time by time to affect the economic environment of any country. Enlist the most prominent macroeconomic problems which need proper attention of policy makers in Pakistan. Furthermore, if we focus on one of the macroeconomic problems that is, the problem of inflation which generally drops its negative repercussions when it hits the economy. So how the monetary authority in the country tackles this harmful problem through the conduct of monetary policy? Enlist the quantitative and qualitative instruments of monetary policy to answer the above statement.Explain the difference between Gali(1999) and new classical monetary economics in explaining relationship between labor productivity and employment