01.00 D0.50 0.03 100.20 100.00 99.80 99.60 99.40 99.20 0.02 0.02 0.01 00.00 0.01 09.50 09.00 -0.01 -0.01 - actual output (left axis) full-employment output (left axis) - actual output (left axis) full-employment output (left axis) -interest rate (right axis) - interest rate (right axis) Panel C Panel D 01.00 D0.50 0.00 09.50 9.00 08.50 0.04 0.04 101.00 100.00 99.00 98.00 97.00 96.00 95.00 94.00 93.00 92.00 0.03 0.03 0.02 0.02 0.01 0.01 -0.01 -0.01 -actual output (left axis) actual output (left axis) full-employment output (left axis) full-employment output (left axis) - interest rate (right axis) - interest rate (right axis) ume that inflation is 1% throughout the entire year and the inflation target is 2%. hich of the four panels the interest rate set by the central bank is inconsistent with the Taylor rule? A. panel A B. panel B C. panel C D. panel D Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Mar-20 Apr-20 Apr-20 May-20 May-20 Jun-20 Jun-20 Jul-20 Jul-20 Aug-20 Aug-20 Sep-20 Sep-20 Oct-20 Oct-20 Nov-20 Nov-20 Dec-20 Dec-20 Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 I Sep-20 Aug-20 Sep-20 Oct-20 Oct-20 Nov-20 Nov-20 Dec-20 Dec-20
01.00 D0.50 0.03 100.20 100.00 99.80 99.60 99.40 99.20 0.02 0.02 0.01 00.00 0.01 09.50 09.00 -0.01 -0.01 - actual output (left axis) full-employment output (left axis) - actual output (left axis) full-employment output (left axis) -interest rate (right axis) - interest rate (right axis) Panel C Panel D 01.00 D0.50 0.00 09.50 9.00 08.50 0.04 0.04 101.00 100.00 99.00 98.00 97.00 96.00 95.00 94.00 93.00 92.00 0.03 0.03 0.02 0.02 0.01 0.01 -0.01 -0.01 -actual output (left axis) actual output (left axis) full-employment output (left axis) full-employment output (left axis) - interest rate (right axis) - interest rate (right axis) ume that inflation is 1% throughout the entire year and the inflation target is 2%. hich of the four panels the interest rate set by the central bank is inconsistent with the Taylor rule? A. panel A B. panel B C. panel C D. panel D Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Mar-20 Apr-20 Apr-20 May-20 May-20 Jun-20 Jun-20 Jul-20 Jul-20 Aug-20 Aug-20 Sep-20 Sep-20 Oct-20 Oct-20 Nov-20 Nov-20 Dec-20 Dec-20 Jan-20 Jan-20 Feb-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 I Sep-20 Aug-20 Sep-20 Oct-20 Oct-20 Nov-20 Nov-20 Dec-20 Dec-20
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
5
Transcribed Image Text:QUESTION 6
Four panels in the figure below show four different evolutions of an economy's output over a year. In all figures, the solid line depicts the actual level of output, the dashed line stands for the full-employment output, and the markered line shows the interest rate set by the central bank.
Panel A
Panel B
102.50
0.06
101.00
0.05
102.00
0.05
100.80
0.04
100.60
100.40
101.50
0.04
0.03
101.00
0.03
100.20
0.02
100.50
0.02
100.00
99.80
0.01
100.00
0.01
99.60
99.50
99.40
99.00
-0.01
99.20
-0.01
actual output (left axis)
actual output (left axis)
full-employment output (left axis)
- full-employment output (left axis)
-interest rate (right axis)
interest rate (right axis)
-
Panel C
Panel D
101.00
100.00
101.00
0.04
0.04
100.50
0.03
0.03
99.00
98.00
97.00
100.00
0.02
0.02
96.00
95.00
94.00
93.00
9.50
0.01
0.01
99.00
98.50
-0.01
92.00
-0.01
actual output (left axis)
actual output (left axis)
- full-employment output (left axis)
full-employment output (left axis)
-
- interest rate (right axis)
•
- interest rate (right axis)
Assume that inflation is 1% throughout the entire year and the iflation target is 2%.
In which of the four panels the interest rate set by the central bank is inconsistent with the Taylor rule?
O A. panel A
OB. panel B
gC. panel C
O D. panel D
Jan-20
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jun-20
Jul-20
Jul-20
Aug- 20
Sep-20
Sep-20
Oc-20
Oct-20
Nov-20
Dec-20
Dec-20
Jan-20
07-uer
07-ga-
Mar-20
07-Jew
Apr-20
Apr-20
May-20
May-20
Jun-20
07-unr
Jul-20
07-in 2
07-any
Aug-20
Sep-20
07-das
Ot-20
Oct-20
Nov-20
Dec-20
Dec-20
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