Pearson eText Economics -- Instant Access (Pearson+)
13th Edition
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Author: Michael Parkin
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Chapter 31, Problem 37APA
To determine
Explain how the inflation targeting is consistent with the Fed’s dual mandate.
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Check out a sample textbook solutionStudents have asked these similar questions
What short-run tradeoff does the Fed face when it tries to achieve its dual mandate? The Fed faces a tradeoff between
A. the money growth rate and real GDP growth rate
B. the inflation rate and unemployment rate
C. keeping prices stable and moderating interest rates
D. changing tax revenues and balancing the government’s budget
1. How do you think Fed policy might change if it included energy and food prices in its
measure of the price level?
2. What two features of the Indian economy meant that an increase in rice prices was
likely to spread through the economy and influence the overall inflation rate?
The Fed's monetary policy strategy that focuses on achieving price stability is known as:
A.
Money supply management
B.
Inflation targeting
C.
Tax policy
D.
Currency exchange
Chapter 31 Solutions
Pearson eText Economics -- Instant Access (Pearson+)
Ch. 31.1 - Prob. 1RQCh. 31.1 - Prob. 2RQCh. 31.1 - Prob. 3RQCh. 31.1 - Prob. 4RQCh. 31.2 - Prob. 1RQCh. 31.2 - Prob. 2RQCh. 31.2 - Prob. 3RQCh. 31.3 - Prob. 1RQCh. 31.3 - Prob. 2RQCh. 31.3 - Prob. 3RQ
Ch. 31.3 - Prob. 4RQCh. 31.4 - Prob. 1RQCh. 31.4 - Prob. 2RQCh. 31.4 - Prob. 3RQCh. 31.4 - Prob. 4RQCh. 31.4 - Prob. 5RQCh. 31 - Prob. 1SPACh. 31 - Prob. 2SPACh. 31 - Prob. 3SPACh. 31 - Prob. 4SPACh. 31 - Prob. 5SPACh. 31 - Prob. 6SPACh. 31 - Prob. 7SPACh. 31 - Prob. 8SPACh. 31 - Prob. 9SPACh. 31 - Prob. 10SPACh. 31 - Prob. 11SPACh. 31 - Prob. 12SPACh. 31 - Prob. 13SPACh. 31 - Prob. 14SPACh. 31 - Prob. 15SPACh. 31 - Prob. 16APACh. 31 - Prob. 17APACh. 31 - Prob. 18APACh. 31 - Prob. 19APACh. 31 - Prob. 20APACh. 31 - Prob. 21APACh. 31 - Prob. 22APACh. 31 - Prob. 23APACh. 31 - Prob. 24APACh. 31 - Prob. 25APACh. 31 - Prob. 26APACh. 31 - Prob. 27APACh. 31 - Prob. 28APACh. 31 - Prob. 29APACh. 31 - Prob. 30APACh. 31 - Prob. 31APACh. 31 - Prob. 32APACh. 31 - Prob. 33APACh. 31 - Prob. 34APACh. 31 - Prob. 35APACh. 31 - Prob. 36APACh. 31 - Prob. 37APACh. 31 - Prob. 38APACh. 31 - Prob. 39APACh. 31 - Prob. 40APACh. 31 - Prob. 41APA
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- Problem 4: The hypothetical information in the following table shows what the values for real GDP and the price level will be in 2017 if the Fed does not use monetary policy: Year Potential GDP Real GDP (trillion) Price level (trillion) $17.7 $18.1 2016 2017 a. If the Fed wants to keep real GDP at its potential level in 2017, should it use an expansionary or contractionary policy? Should the Fed buy or sell Treasury bills? 114 $17.7 $17.9 116 b. Suppose the Fed's policy is successful in keeping real GDP at its potential level in 2017. States whether each of the following will be higher or lower if the Fed had taken no action. I. Real GDP II. The inflation rate III. The Unemployment rate c. Draw an aggregate demand and aggregate supply graph to illustrate your answer. Be sure that your graph contains LRAS curves for 2016 and 2017; AD curves for 2016 and 2017; with and without monetary policy action; and equilibrium real GDP and the price level in 2017, with and without policy.arrow_forwardDescribe how rapid inflation can undermine money's ability to perform its three basic functions and Fed's actions to control inflation.arrow_forwardTopic 1. Suppose you read in the news paper that all last week the Fed conducted open market sale and that on Wednesday of last week it raised the discount rate. Discuss what the Fed is trying to do and why it is doing it. Topic 2. Discuss why some economists who believe in Keynesian transmission mechanism view the money supply as a "string", they argue you cannot push a string. In other words, you cannot always force Real GDP up by increasing (pushing up) the money supply. Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- Federal Reserve Economic Data (FRED), from Federal Reserve Bank of Saint Louis provide the data in the chart below. In addition on Dec 14, 2016- the Federal Funds Rate was 0.41 percent per year, and on Dec 28, 2016 it was 0.66 percent per year. At the current level of the Federal Funds Rate, the Fed is. concerned about inflation 6.0 7.0- 6.0 5.0 4.0 3.0- 2.0 1.0 0.0- Federal funds rate (percent per year) 09/2006 09/2008 09/2010 Year more; than it is about the exchange rate less; than it is about unemployment more; than it is about unemployment less; than it is about government debt 09/2012 09/2014 09/2016arrow_forwardUse the Front Page to answer three questions. FRONT PAGE Fed Raises Key Interest Rate Washington D.C.-The Fed, as expected, raised the target rate on federal funds from 2.25 to 2.5 percent today. Fed chair Jay Powell said the economy appeared "healthy" and "solid" enough to accommodate a small increase in interest rates. The Fed's goal is to keep inflation under control as the economy continues to grow and unemployment falls to historic levels. President Trump reacted immediately to the Fed action, calling it "foolish" and "crazy" - an impediment to stronger growth and still more jobs. Source: News reports of December 19-20, 2018. Instructions: Round your response to two decimal places. a. What was the Fed's target for the fed funds rate in late December 2018? % b. This was (Click to select) from the previous period. c. This rate change would (Click to select) aggregate demand.arrow_forwardQuestion 24 One of the roles of the Fed is to _ Collect taxes Propose the budget Balance the federal budget Clear checksarrow_forward
- Suppose that the Federal Reserve wants to reduce the money supply. Explain the three main policy instruments the Fed could use to reduce the money supply. In each case, detail how these policy actions are supposed to work, including the role of the private banks.arrow_forwardBriefly describe how the Fed would use its three main policy tools to bring inflation down. (1) The Fed should increase or decrease the benchmark rates such as Fed funds rate? Briefly explain Why. (2) The Fed should buy or sell Treasury securities? Briefly explain Why. (3) The Fed should increase or decrease the bank reserve requirement ratio? Briefly explain Why.arrow_forwardAfter Lehman Brothers filed for bankruptcy in September 2008, the FED doubled its balance sheet from $1 trillion to $2 trillion over the next two months. Many argued this so-called “money printing” would lead to hyperinflation. Explain the ways the FED can expand its balance sheet and why expansion of its BS (as well as QE 2 and 3 which also expanded its balance sheet) did not lead to inflation moving above its 2% target. [You need to discuss the causes of inflation here.]arrow_forward
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