Economics (MindTap Course List)
13th Edition
ISBN: 9781337617383
Author: Roger A. Arnold
Publisher: Cengage Learning
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Question
Chapter 16.3, Problem 3ST
To determine
Changes in the real GDP and price level in the short run and long run when the policy is incorrectly anticipated.
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Explain the impact effect of this shock on output, inflation, and the real interest rate.
Explain the dynamic response of output, inflation, and interest rates in subsequent periods. Does the economy converge back to the same long-run equilibrium?
Explain how the central bank responds to inflation and the importance of the monetary authority following the Taylor principle.
How would your answer to (B) change if the shock lasted for several periods (instead of one period) before reverting to zero?
What is the tradeoff that the Fed faces in the short run?
In the short run, the Fed faces a tradeoff between ________.
A.
the nominal interest rate and the real interest rate
B.
monetary aggregates and credit aggregates
C.
short-term interest rates and long-term interest rates
D.
inflation and unemployment
The inflation rate is 12 percent, and the central bank is considering slowing the rate of money growth to reduce inflation to 8 percent. Economist Carlos believes that expectations of inflation change quickly in response to new policies, whereas economist Felix believes that expectations are very sluggish.
1. True or False: Economist Felix is more likely to favor using contractionary policy to reduce inflation than economist Carlos.
Chapter 16 Solutions
Economics (MindTap Course List)
Ch. 16.2 - Prob. 1STCh. 16.2 - Prob. 2STCh. 16.2 - Prob. 3STCh. 16.3 - Prob. 1STCh. 16.3 - Prob. 2STCh. 16.3 - Prob. 3STCh. 16.5 - Prob. 1STCh. 16.5 - Prob. 2STCh. 16 - Prob. 1QPCh. 16 - Prob. 2QP
Ch. 16 - Prob. 3QPCh. 16 - Prob. 4QPCh. 16 - Prob. 5QPCh. 16 - Prob. 6QPCh. 16 - Prob. 7QPCh. 16 - Prob. 8QPCh. 16 - Prob. 9QPCh. 16 - Prob. 10QPCh. 16 - Prob. 11QPCh. 16 - Prob. 12QPCh. 16 - Prob. 13QPCh. 16 - Prob. 14QPCh. 16 - Prob. 15QPCh. 16 - Prob. 1WNGCh. 16 - Prob. 2WNGCh. 16 - Prob. 3WNGCh. 16 - Prob. 4WNGCh. 16 - Prob. 5WNG
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