QUESTION 6Four 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, thedashed line stands for the full-employment output, and the markered line shows the interest rate set by the central bank.Panel APanel B102.500.06101.000.05100.80100.60100.40100.20102.000.050.04101.500.040.03101.000.030.02100.500.02100.0099.800.01100.000.0199.6099.4099.2099.5099.00-0.01-0.01actual 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)Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20 Panel CPanel D101.000.04101.000.04100.00100.500.030.0399.0098.00100.000.020.0297.0096.0095.0094.0099.500.010.0199.0093.0092.0098.50-0.01-0.01-actual output (Ileft 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 inflation 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 AO B. panel BO C. panel CO D. panel DJan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20Sep-20Oct-20Nov-20Dec-20Jan-20Feb-20Mar-20Apr-20May-20Jun-20Jul-20Aug-20* Sep-20Oct-20Nov-20Dec-20

Taylor rule is used to predict how central banks should change interest rates due to changes in the…

Assume that inflation is 1% throughout the entire year and the inflation 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 B. panel B O C. panel C O D. panel D

Assume that inflation is 1% throughout the entire year and the inflation 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 B. panel B O C. panel C O D. panel D

ENGR.ECONOMIC ANALYSIS

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ISBN:9780190931919

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Chapter1: Making Economics Decisions

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Question

Panel C
Panel D
101.00
0.04
101.00
0.04
100.00
100.50
0.03
0.03
99.00
98.00
100.00
0.02
0.02
97.00
96.00
95.00
94.00
99.50
0.01
0.01
99.00
93.00
92.00
98.50
-0.01
-0.01
-actual output (Ileft 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 inflation 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
O B. panel B
O C. panel C
O D. panel D
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
Sep-20
Oct-20
Nov-20
Dec-20
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20
Jul-20
Aug-20
* Sep-20
Oct-20
Nov-20
Dec-20

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