MACROECONOMICS (LL)
MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Chapter 16, Problem 6P
To determine

Change in the Federal Fund rate in accordance with the Taylor Rule.

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Since 2009, how much has been borrowed through the federal funds market? O. $787 million O. $43 billion O. $1,148 billion Incorrect O. $0
Suppose that this year’s money supply is £500 billion, nominal GDP is £10 trillion,  and real GDP is £5 trillion.  1. Suppose that velocity is constant, and the economy’s output of goods and  services rises by 5 percent each year. What will happen to nominal GDP and the price level next year if the Fed keeps the money supply constant? 2. What money supply should the Fed set next year if it wants to keep the price level stable? 3. What money supply should the Fed set next year if it wants inflation of 10 percent?
54) If a higher inflation is expected, what would you expect to happen to the shape of the yield curve? Why? 55) What is the shape of the yield curve when short rates are expected to fall in the medium term, and then increase? Demonstrate this graphically. 56) What is the shape of the yield curve when short-term rates are expected to rise sharply in the mid-term and moderately in the long-term? 57) When interest rates on 1-2-3-4-5 year bonds are 2.0, 2.1, 2.3, 2.4, and 2.5 percent respectively, what information do we derive on future economic growth and real output?
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