Explain the given statement and identify why the primary goal of Fed is price stability.

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Answer 1

Question

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

You are the manager of a large automobile dealership who wants to learn more about the effective- ness of various discounts offered to customers over the past 14 months. Following are the average negotiated prices for each month and the quantities sold of a basic model (adjusted for various options) over this period of time. 1. Graph this information on a scatter plot. Estimate the demand equation. What do the regression results indicate about the desirability of discounting the price? Explain. Month Price Quantity Jan. 12,500 15 Feb. 12,200 17 Mar. 11,900 16 Apr. 12,000 18 May 11,800 20 June 12,500 18 July 11,700 22 Aug. 12,100 15 Sept. 11,400 22 Oct. 11,400 25 Nov. 11,200 24 Dec. 11,000 30 Jan. 10,800 25 Feb. 10,000 28 2. What other factors besides price might be included in this equation? Do you foresee any difficulty in obtaining these additional data or incorporating them in the regression analysis?

Answer 2

Question

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

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Answer 3

Question

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

Answer 6

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

Answer 7

Chapter 31, Problem 1SPA

To determine

Explain the given statement and identify why the primary goal of Fed is price stability.

Answer 8

Expert Solution & Answer

Explanation of Solution

The monetary policies of the Fed always are set to achieve its basic primary goals of maximum employment, stable prices, and moderate long-term interest rates, in which, the price stability is treated as the primary goal. The reason is that this primary goal directly meets the second goal and indirectly meets the remaining two goals of Fed. Because when an economy achieves price stability, it indicates that the inflation rate is low. A lower price level will help to maintain the long-term interest rate. On the contrary, when the price level is stable, consumers and investors will be more interested to increase the expenditure. As a result, the unemployment rate will close the natural rate of unemployment. Hence, the Fed always sets the price stability as a primary policy goal to meet its objectives.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Economics Concept Introduction

Monetary policy: The monetary policies are the policies taken by the central bank to chase its objectives such as price stability and maximum employment.

Answer 12

Ch. 31.1 - Prob. 1RQ Ch. 31.1 - Prob. 2RQ Ch. 31.1 - Prob. 3RQ Ch. 31.1 - Prob. 4RQ Ch. 31.2 - Prob. 1RQ Ch. 31.2 - Prob. 2RQ Ch. 31.2 - Prob. 3RQ Ch. 31.3 - Prob. 1RQ Ch. 31.3 - Prob. 2RQ Ch. 31.3 - Prob. 3RQ

Explain the given statement and identify why the primary goal of Fed is price stability.

Explain the given statement and identify why the primary goal of Fed is price stability.

Explanation of Solution

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Chapter 31 Solutions