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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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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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

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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