Suppose the Central Bank of Kandor has a current federal funds rate of 3%. They are presented with the following information: current inflation rate 2%; inflation rate target 4%; current GDP is 4% above than full-employment GDP. According to the Taylor rule, which policy approach should the Central Bank use to reach its goal? accommodative monetary policy O tight money policy O No change in monetary policy is needed since the federal funds rate is at the desired level. O contractionary fiscal policy

Suppose the Central Bank of Kandor has a current federal funds rate of 3%. They are presented with the following information: current inflation rate 2%; inflation rate target 4%; current GDP is 4% above than full-employment GDP. According to the Taylor rule, which policy approach should the Central Bank use to reach its goal? accommodative monetary policy O tight money policy O No change in monetary policy is needed since the federal funds rate is at the desired level. O contractionary fiscal policy

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter22: Money Growth And Inflation

Section: Chapter Questions

Problem 1PA

See similar textbooks

Similar questions

Question 4Suppose a country’s inflation level is higher than desired, and unemployment levels arelower than expected – the central bank decides that the economy is ‘overheated’ andattempts to use the appropriate monetary policy to deal with the situation. Describe,with the help of the appropriate figure, how a central bank might go about implementingsuch monetary policy, the subsequent effects this has on interest rates, the quantity ofmoney in the market, and the process through which this affects the level of expenditurein the economy.
Which statement is true? O Austrians believe that financial markets are always efficient and that no central bank intervention will cause a distortion (S=1). O Monetarists, Real Business Cycle Theorists, and Austrian Business Cycle Theorists all believe that business cycles are a result.of bad monetary policy. O Monetarists believe that financial markets are efficient (S=1), whereas Keynesians belie financial markets are prone to failure (S 1). O Monetarists believe that financial markets are prone to failure (S#l), whereas Keynesians believe fınancial markets are efficient (S=1).
Which of the following is a position held by monetarists? O Aggregate demand depends on the money supply and on velocity. The short-run aggregate supply curve is horizontal. The economy is unstable; wages and prices are inflexible. PRICE LEVEL The velocity of money is constant. Initially, the economy is in long-term equilibrium. Suppose there is a decrease in velocity-that is, there is a decrease in the average number of times a dollar is spent to buy goods and services. Show the long-run effect of this change according to the monetarist view, ceteris paribus, by dragging one or both curves on the graph below. REAL GDP SRAS AD AD SRAS (?)
QUESTION 5 Which of the following statements is correct? O A. monetary policy was contractionary during the Great Recession and contractionary during the COVID Recession O B. monetary policy was expansionary during the Great Recession and expansionary during the COVID Recession O C. monetary policy was contractionary during the Great Recession and expansionary during the COVID Recession O D. monetary policy was expansionary during the Great Recession and contractionary during the COVID Recession
Which of the following represents a short-run e_ect of a monetary contraction? Select one: O a. an increase in the interest rate O b. a reduction in the price level O c. all of the above O d. a reduction in output
Please answer fast
4the money supply in freedonia this year is $150 billion Nominal GDP is $750 billions and real GDP is $250 billion. assuming that velocity of money is stable real GDP grows by 2%this year and the money supply does not change. what are the velocity price level and inflation rate
Consider the model of supply and demand for central bank money. Assumethat there there are commercial banks. Suppose that people hold 20% of their moneyin currency and 80% of their money in deposits. The central bank sets the reserve-todeposit ratio at 10%. In the first period, the central bank increases the supply of moneyby $200, buying bonds through Open-Market Operations. Use this information to answerthe following questions:(a) For the second period (after the central bank has injected $200 in theeconomy), calculate: (i) the demand for currency, (ii) the amount of deposit held atthe commercial banks, (iii) the demand for reserves held at the central bank, and(iv) the demand for the high-powered money. How much is the additional moneysupply created at the end of the second period?2(b) How much is the additional money supply created at the end of the thirdperiod?(c) As time continues, additional money supply will be created. Calculatethe total increase in the money supply as a…
Please answer fast please help arjent in both questions
Suppose a researcher discovers that a measure of thetotal amount of debt in the U.S. economy over thepast 20 years was a better predictor of inflation andthe business cycle than M1 or M2. Does this discoverymean that we should define money as equal to the totalamount of debt in the economy?
The quantity theory of money: What is the key endogenous variable in the quan-tity theory? Explain the efect on this key variable of the following changes: (a) Te money supply is doubled.(b) Te velocity of money increases by 10%.(c) Real GDP rises by 2%.(d) Te money supply increases by 3% while real GDP rises by 3% at thesame time
In regard to monetary policies, nonactivists have various proposals. True or False: Some nonactivists believe in a predetermined-money growth rate, which suggests that the monetary authorities should target the proper federal funds rate before implementing monetary policies. O True O False Which of the following statements best explains the difference between the Taylor rule and the two other nonactivist rules (the constant-money growth rate rule and the predetermined-money growth rate rule)? O The Taylor rule does not take into account the stability of prices. O The Taylor rule is not a derivation of the equation of exchange. O The Taylor rule suggests how much the money supply should grow. O The Taylor rule does not take into account the current state of the economy.