PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Question
Chapter 14, Problem 14.5CC
To determine
Estimate the value of changes in real interest rate.
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If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________.
A) it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate
B) it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate
C) it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand
D) it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand
E) none of the above
Economics
Assess the following event on the assumption that policymakers are using the Taylor rule as a basis for policy changes, as specified in equation: r = 2 + 0.5(π – π^T) + 0.5(Y-Y^P). In 1973, the United States experienced an unexpected slowdown in productivity, which reduced potential output. Show how the real interest rate (r), output (Y), and inflation behave in the short-run and long-run. Explain and graph using MP, IS, and AD-AS graph to demonstrate.
do not provide hand written solution
Suppose the U.S. economy is initially at long run equilibrium, when there is an unexpected large increase in the price of steel used by firms in production.How does this impact the U.S. economy? (write out either "inflationary" or "recessionary"
In response to this what monetary policy would the Fed employ? (write one of the following: "raise taxes", "lower taxes", "raise money supply", or "lower money supply"What is the most likely way the Fed will accomplish this change in the monetary policy? (write one of the following: "buy securities", "sell securities", "raise discount rate", "lower discount rate", or "legislation"This action by the Fed will cause interest rates to _______. (Write out "increase" or "decrease"The end result of the monetary policy is a shift of which curve in which direction. (Write out one of the following: "AD right", "AD left" "AS left", "AS right"
Chapter 14 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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