What does a steep upward sloping yield curve indicate? You determining your answer keep in mind the Fisher equation: i=r+π^e i=r+π^e, where i is the nominal interest rate, r is the real interest rate and π^e is r the expected inflation rate. Group of answer choices higher short term expected inflation higher long-term expected inflation lower long-term expected inflation random changes in expected inflation

What does a steep upward sloping yield curve indicate? You determining your answer keep in mind the Fisher equation: i=r+π^e i=r+π^e, where i is the nominal interest rate, r is the real interest rate and π^e is r the expected inflation rate. Group of answer choices higher short term expected inflation higher long-term expected inflation lower long-term expected inflation random changes in expected inflation

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter13: Inflation

Section: Chapter Questions

Problem 12SQ

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C= 1,600+0.6(Y-7) - 2,000r P=2,500-1,000r G=2,000 NX= 50 T= 2,000 The Bank of Lotusland, the central bank, has announced that it will set the real interest rate according to the policy reaction function found in the table below. Inflation rate, n Real interest rate, r 0.040 0.045 0.050 0.055 0.060 0.00 0.01 0.02 0.03 0.04 a. For each of the rates of inflation given below, find autonomous expenditure and short-run equilibrium output in Lotusland. Instructions: Enter your responses rounded to whole numbers. Inflation rate, n Real interest rate, r 0.040 0.045 0.050 0.055 0.060 0.00 0.01 0.02 0.03 0.04 Autonomous expenditure Equilibrium output Using the data above, graph the AD curve Instructions: in the graph below, use the line tool AD' to draw the aggregate demand line for levels of inflation 4 percent and 0 percent. Draw only the two endpoints.
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Consider the following: C = 400 + 0.5·(Y – T) I = 80 + 0.1·Y – 1000·(i – πe + x)NX = 0.01·Y*– 0.1·Y – 4·(E – 100) G = 600 T = 480 Y* = 20,000 The central bank anchored inflation expectations at target inflation rate of π̅= 0.02. Household borrowing rates and businesses include a 4% risk premium over policy rate (i) so: x - 0.04. The central bank has set policy rate equal to 2% (, ī = 0.02). The Exchange rate (E) is 100. Expected future exchange rate is also 100. a) Find short-run equilibrium level of output (Y) and trade balance (NX). Is there a trade deficit or surplus? b) Assume the governent cuts tax level to ?′ = 400. What is the new short run equilibrium level of output (?′) and trade balance (NX'). Is this economy suffering from twin deficits (trade and budget). What policy change could help?c) what is the value of the fiscal multiplier fromt he tax cut? if it were a closed economy would it be greater or smaller? d) What effects will the tax cuts have on investments and on the…
What might the yield curve indicate about the market’s predictions about the inflation rate in the future?
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