What is the advantage of Fed transparency, the Fed's communication strategy since 2012, of clear communication about its actions and interpretations of data? Since inflation expectations are a key determinant of inflation, molding those expectations through communication of Fed intentions is potentially a powerful tool of monetary policy. O It reflects the culture of corporate transparency that has emerged in America in recent decades. O By creating expectations about future Fed policy, the Fed can catch people off-guard by upsetting those expectations, thereby achieving various policy objectives. O It exemplifies irrational economic behavior-a topic explored by behavioral economists.

What is the advantage of Fed transparency, the Fed's communication strategy since 2012, of clear communication about its actions and interpretations of data? Since inflation expectations are a key determinant of inflation, molding those expectations through communication of Fed intentions is potentially a powerful tool of monetary policy. O It reflects the culture of corporate transparency that has emerged in America in recent decades. O By creating expectations about future Fed policy, the Fed can catch people off-guard by upsetting those expectations, thereby achieving various policy objectives. O It exemplifies irrational economic behavior-a topic explored by behavioral economists.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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When the Fed supplies "too much" monetary stimulus in the face of a negative aggregate demand shock: Select one: O a. inflation, real growth, and nominal wage growth all increase. Ob. inflation, real growth, and nominal wage growth all decrease. c. inflation and nominal wage growth decrease, but real growth increases. Od. inflation increases, but real growth and nominal wage growth decrease.
2. Create the T-entry for the Fed that goes together with the choice in the question above
Monetary Policy: End of Chapter Problem Milton Friedman and Anna Schwartz argued in their Monetary History of the United States that money growth and velocity usually shift in the same direction. Thus, higher growth causes optimism and slower growth causes pessimism. They believed that velocity had its own shocks as well. a. Let's run through some examples of how this might work, in a setting where the Fed wants to keep AD growth stable at 10%. To keep things simple, we will assume that the Fed can control money growth perfectly. We will also assume that a 1% change in money growth causes a 0.5% shock to velocity growth in the same direction. Using these assumptions, fill in the missing values for the following table. For each case: AD = Initial Velocity Shock + Money Growth + Velocity Shock Caused by Money Growth Round your answer to the nearest hundredth. Year 2 money growth: Year 3 money growth: 254 15 Incorrect 8 incorrect Year 2 3 Initial Velocity Shock 4% 3% 16% 8% 4% 0% Year 2…
Assume that the current demand for goods depends on expectations in the IS-LM model. A monetary contraction in the current period will cause a leftward shift in the IS curve if: O O current and expected future real interest rates are positively related current and expected future real interest rates are negatively related monetary policy cannot affect, directly or indirectly, the position of the IS curve in the current period the central bank is expected to reverse any current movements in monetary policy in the future current and expected future real interest rates are unrelated
Since the end of the Great Recession of 2008, interest rates have been at historic lows—in some cases, close to zero. How is expansionary monetary policy, or more specifically a open market purchase, supposed to work and How do near-zero interest rates limit the ability of expansionary monetary policy to work? how effective has the Fed’s policy been as a response to the Great Recession of 2008 and more recently the Covid 19 Recession? short answer ( paragraph ) supported by evidence
If the economy is currently experiencing 10% inflation, which Monetary Policy changes should the Federal Reserve implement (used)? Select all that apply O increase the reserve requirement O lower the reserve requirement O increase the discount rate O lower the discount rate O sell bonds on the open market O buy bonds on the open market O O O O O O
Assume that the current interest rate is 4.0% and the economy is in a mild recession somewhat below YN. Using the model of Liquidity Preference, illustrate with a graph and short explanation how that equilibrium rate of 4.0% is determined. Now, assume the next move by the Fed at its December meeting is to raise the target rate of interest by 50 basis points out of a fear of future inflation. Illustrate this contractionary monetary policy graphically, first through liquidity preference, and then via IS-LM. Could this contractionary move by the Fed result in full employment? Why or why not?
11. Figure: Negative Supply Shock Inflation rate, T 16% 12% 11% 9% 3% Opoint A. Opoint B. B O point X. Opoint V -3% -2% -1% 3% Reference: Ref 16-4 (35-4) (Figure: Negative Supply Shock) Refer to the figure. This economy initially begins at point A and a negative supply shock takes it to point Y. If the Fed reacts by increasing money growth by 3%, this would take the economy to: Real GDP growth rate
es Q Suppose that inflation is 2 percent, the Federal funds rate is 4 percent, and real GDP falls 2 percent below potential GDP. Acording to the Taylor rule, in what direction and by how much should the Fed change the real Federal funds rate? According to the Taylor rule, the Fed should increase the Federal funds rate by 6.5 percentage point. 4 A F2 C 2 N Search W S F3 # 3 X alt DII E F4 D $ 4 C R F % 5 < Prev **** V F6 T G 6 of 26 F7 Y B & V 7 H --- G FB N Next * 00 8 J F9 M prt sc ( a K F10 home O V F11 L alt end P V F12 | T ctrl m insert [ +11 ? 1 delete 1
Money and Banking Assignment 3 [Due on FIRST NAME: LAST NAME: NOTE: COMPLETE THE ASSIGNMENT IN THE S FILE ON THE D2L PAGE. I Graphical (1) Suppose the Fed raises the real interest rate ( and consumner confidence falls around the same t time (as occurred in 1990). Show with a graph what happens to the AE and Phillips curves and to output and inflation.