What does the Taylor rule imply that policymakers shoulddo to the fed funds rate under the following scenarios?a. Unemployment rises due to a recession.b. An oil price shock causes the inflation rate to rise by1% and output to fall by 1%.c. The economy experiences prolonged increases inproductivity growth while actual output growth isunchanged.d. Potential output declines while actual output remainsunchanged.e. The Fed revises its (implicit) inflation target downward.f. The equilibrium real fed funds rate decreases.

Q: Assume that the unemployment rate decreases substantially and that there is very high inflation.…

A: Central bank uses monetary tools to control money supply in order to stabilize the economy .

Q: $300, G-$200, NX -$100, and that the money supply is equal to $300. Based upon these assumptions,…

A: velocity  of money supply refers the number of times a currency changes for the purchasing of goods…

Q: According to Keynes's analysis of the speculative demand for money, which of the following shows…

A: Speculative Demand for Money: This is one of the components of the total demand for money. It…

Q: If the Fed is following the "benchmark Taylor Rule", and the equilibrium real interest rate is 4%,…

A: Taylor rule: R = r* + π + 0.5 * (π - π*) + 0.5 * (Output gap) where, R = nominal federal funds rate…

Q: Which of the following statements about the income velocity of money (V) is NOT correct? a. It is an…

A: The income velocity of money (V) is defined as the number of times per year that a unit of currency…

Q: af planned aggregate spending in an economy can be written as PE 12,000 0.80Y-30,000, and potential…

A: Planned aggregate expenditure: PAE = 12000 + 0.80Y - 30,000r Where PAE is planned aggregate…

Q: could impede the attainment of the Committee's goals. The Committee's assessments will take into…

A: The Federal Open Market Committee sets a target rate of interest at which the commercial banks ought…

Q: when the growth rate of the money supplt is decreased, interest rates will fall immediately if the…

A: When the growth rate of the money supply is decreased, interest rates will rise immediately if the…

Q: What incentives arise for a central bank to fall into the time-inconsistency trap of pursuing overly…

A: The central bank is the governing entity in charge of the country's whole banking and monetary…

Q: Question 2. Suppose Wal-Mart and other major stores will not accept credit cards andconsumers will…

A: Liquidity means the efficiency or ease with which an asset or assets can be converted into cash…

Q: Question 2. AD-AS Analysis with an Alternative Policy Rule. This question will have you derive a…

A: The output gap would enter the fed's monetary policy because along with inflation targeting and…

Q: When the Federal Reserve increases the money supply, at a given price level the amount of output…

A: Increase in money supply means rightward shift in money supply.  The increase in money supply…

Q: What trade offs does the Fed face, particularly in the short run in attempting to reach its goals?…

A: Monetary policy refers to the set of policies a central bank of a country uses during the time of…

Q: The latest data published by the Federal Reserve (Fed) on the evolution of the M2 for the period…

A: AD-AS model, growing money furnish reduce interest rate and lower interest rate will grow AD.…

Q: A. Explain the principle known as monetary policy ineffectiveness and discuss Lucas’ argument as to…

A: Monetary policy refers to the actions taken by a central bank or monetary entities to oversee and…

Q: What is the current federal fund rate using Taylor Rule.The inflation rate is 5%, target inflation…

A: Inflation Rate refers to the rate at which the price of goods or services increases as compared to a…

Q: how does small denomatons coins given by the gobernment affect liquidity

A: Small denomination coins are coins with a low face value that are issued by governments as a means…

Q: Using the Taylor Rule, find the appropriate Federal Funds rate (FFR). Assume that the Fed has…

A: Below is the given values: Target inflation rate = 2% GDP growth rate =3% Current inflation rate =…

Q: What is the current federal fund rate using Taylor Rule. The inflation rate is 5%, target inflation…

A: Taylor rule: R = r* + π + 0.5*(π - π*) + 0.5*(Output gap) where, R = nominal federal funds rate  r*…

Q: 1. Explain what will take place in an SRAS-AD diagram if the Fed expands the money supply.

A: DISCLAIMER  “Since you have asked multiple questions, we will solve the first question for you. If…

Q: Suppose a central bank targets an inflation rate of 3%. She projects a long-term economic growth…

A: Monetary policy: - it is a tool of government or central bank of a country in which they control…

Q: A severe financial crisis in 2007 triggered the Great Recession. The Dodd-Frank Act was passed in…

A: Economics refers to the study of scarcity and its implications for the use of resources, production…

Q: Suppose that inflation is 2 percent, the federal funds rate is 4 percent, and real GDP falls 2…

A: The inflation rate is the rise in the aggregate price level. The federal funds rate is the rate at…

Q: If planned aggregate spending in an economy can be written as PAE = 15,000 + 0.6Y − 20,000r,…

A: Aggregate demand is the sum of consumption, investment, government spending and net export.  Planned…

Q: 1. The latest data published by the Federal Reserve (Fed) on the evolution of the M2 for the period…

A: Money supply refers to the amount of money being circulated in an economy at a point of time. There…

Q: In which of the following situations is the Fed most likely to raise the federal funds rate target?…

A: Fed makes changes in the federal funds rate according to the need of the market to stabilize it…

Q: )  The Fed has increased the target rate of the federal funds rate nine times since December 2015.…

A: The federal funds rate refers to the interest rate that one commercial bank charge other commercial…

Q: Monetary Policy: End of Chapter Problem Milton Friedman and Anna Schwartz argued in their Monetary…

A: Monetary policy refers to the policy adopted by the monetary authority of a nation to affect…

Q: Refer to the graph shown below. Suppose the economy is initially at A but then the Fed adopts a…

A: AD stands for aggregate demand. AS stands for aggregate supply. AD-AS is a macroeconomic mode that…

Q: A) Using the original Taylor Rule where the equilibrium real rate of interest is estimated to be 2%…

A: Given:For 1976-04-01,FF=5.2PCE INF(Ie)=5.6PCE CORE=6GDPe =5654.8GDPt =5784.9UR=7.6Target inflation…