A4 Suppose the Fed commits itself to the use of the Taylor rule (shown bolow) to set the federal funds rate.Federal funds rote Long - run target 1.5(Inflation rate - Inflation target) +0.6(Output gap)Suppose the Fed has set the long-run target for the federal funds rate at 2 percent and its target for inflation at 2.5 percentthe economy is currentiy hiting the Fed's inflation target ond GDP exacty equals the trend GDP, then the Fed will set the federal funds rate at percent. (Enter your response with norounding)Now suppose the economy slows down, causing the actual inflation rate to decrease to 1.5 percent and the economy to fall 2.5 percent below trend GDPIn this case, the Fed will seek to set the federal funds rate at percent (Enter your response with no rounding)To achieve its target for the federal funds rate, the Fed may(Check al that apply)DA. Purchase Treasury bonds in the open market.D. Decreose the interest rate paid on reserves deposited at the FedDc. Decrease corporale taxesD Increase lending from the discount windowDE Decrease the reserve requrement

Suppose the Fed commits itself to the use of the Taylor rule (shown bolow) to set the federal funds rate. Federal funds rate Long-run target 1.5(Inflation rate - Inflation target)+0.6(Output gap) Suppose the Fed has set the long-run target for the federal funds rate at 2 percent and its target for inflation at 25 percent Wthe oconomy in currnty hiting the Fed's infation target and GDP exacty equals the trond GDP, then the Fod wil set the federal funds rate at percent (Enter your response with no rounding) Now nuppose the economy slows down, causing the actual inflation rate to decrease to 1.5 percent and the economy to fall 2.5 percent below trend GDP In this cane, the Fed will seok to set the federal funds rate at percent (Enter your response with no rounding) To achieve its target for the federal funds rate, the Fed may (Check al that apply) DA. Purchase Treasury bonds in the open market D Decrease the interest rate paid on reserves deposited at the Fed DC. Decrease corporale taxes CD Increase lending from he discount window DE Decrease the reserve requrement

Suppose the Fed commits itself to the use of the Taylor rule (shown bolow) to set the federal funds rate. Federal funds rate Long-run target 1.5(Inflation rate - Inflation target)+0.6(Output gap) Suppose the Fed has set the long-run target for the federal funds rate at 2 percent and its target for inflation at 25 percent Wthe oconomy in currnty hiting the Fed's infation target and GDP exacty equals the trond GDP, then the Fod wil set the federal funds rate at percent (Enter your response with no rounding) Now nuppose the economy slows down, causing the actual inflation rate to decrease to 1.5 percent and the economy to fall 2.5 percent below trend GDP In this cane, the Fed will seok to set the federal funds rate at percent (Enter your response with no rounding) To achieve its target for the federal funds rate, the Fed may (Check al that apply) DA. Purchase Treasury bonds in the open market D Decrease the interest rate paid on reserves deposited at the Fed DC. Decrease corporale taxes CD Increase lending from he discount window DE Decrease the reserve requrement

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Concept explainers

Comparative Advantage and Absolute Advantage Analysis

The theory of absolute advantage was given by Adam Smith in the year 1776.

Question

Suppose the Fed commits itself to the use of the Taylor rule (shown bolow) to set the federal funds rate.
Federal funds rote Long - run target 1.5(Inflation rate - Inflation target) +0.6(Output gap)
Suppose the Fed has set the long-run target for the federal funds rate at 2 percent and its target for inflation at 2.5 percent
the economy is currentiy hiting the Fed's inflation target ond GDP exacty equals the trend GDP, then the Fed will set the federal funds rate at percent. (Enter your response with no
rounding)
Now suppose the economy slows down, causing the actual inflation rate to decrease to 1.5 percent and the economy to fall 2.5 percent below trend GDP
In this case, the Fed will seek to set the federal funds rate at percent (Enter your response with no rounding)
To achieve its target for the federal funds rate, the Fed may
(Check al that apply)
DA. Purchase Treasury bonds in the open market.
D. Decreose the interest rate paid on reserves deposited at the Fed
Dc. Decrease corporale taxes
D Increase lending from the discount window
DE Decrease the reserve requrement

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