MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
8th Edition
ISBN: 9780134518312
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Question
Chapter 28, Problem 3SPPA
To determine
To explain:
The impact on nominal interest rates in the short-run and on the value of money in long run if an open market purchase of securities is made by the central bank.
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Suppose the current inflation rate is a constant 7% and the central bank implements a disinflation policy to reduce it to its target rate of 3%. To achieve this objective the central bank, by increasing its cash rate, raise the nominal interest rate from its current 9% to 14%. In the long run, at which the central bank achieves its inflation target, what will be the nominal rate of interest, the real rate of interest and the inflation rate?
Why are nominal wages sticky (adjust slowly) in the short run?
wage contracts are made in nominal terms
because interest rates adjust slowly
the CPI adjusts quickly
monetary policy takes time to affect nominal GDP
Which of the following events raises the nominal interest rate, other things remaining the same?
A.
The increased use of mobile wallets
B.
The Fed makes an open market purchase
C.
An increase in the monetary base
D.
A rise in the price level
Thank you
Chapter 28 Solutions
MyLab Economics with Pearson eText -- Access Card -- for Foundations of Economics
Ch. 28 - Prob. 1SPPACh. 28 - Prob. 2SPPACh. 28 - Prob. 3SPPACh. 28 - Prob. 4SPPACh. 28 - Prob. 5SPPACh. 28 - Prob. 6SPPACh. 28 - Prob. 7SPPACh. 28 - Prob. 8SPPACh. 28 - Prob. 9SPPACh. 28 - Prob. 10SPPA
Ch. 28 - Prob. 11SPPACh. 28 - Prob. 1IAPACh. 28 - Prob. 2IAPACh. 28 - Prob. 3IAPACh. 28 - Prob. 4IAPACh. 28 - Prob. 5IAPACh. 28 - Prob. 6IAPACh. 28 - Prob. 7IAPACh. 28 - Prob. 8IAPACh. 28 - Prob. 9IAPACh. 28 - Prob. 10IAPACh. 28 - Prob. 11IAPACh. 28 - Prob. 12IAPACh. 28 - Prob. 1MCQCh. 28 - Prob. 2MCQCh. 28 - Prob. 3MCQCh. 28 - Prob. 4MCQCh. 28 - Prob. 5MCQCh. 28 - Prob. 6MCQCh. 28 - Prob. 7MCQCh. 28 - Prob. 8MCQ
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