pose that the equilibrium real federal funds rate is 1 percent and the target rate of inflation is 1 percent. Use the following information and the Taylor rule to calculate the federal funds target: Current inflation rate= 3 percent Potential real GDP = $14.74 trillion Real GDP = $14.39 trillion federal funds target rate is %. (Enter your response rounded to two decimal places.)
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- Suppose that the equilibrium real overnight interest rate is 1 percent and the target rate of inflation is 1 percent. Use the following information and the Taylor rule to calculate the overnight interest rate target:_____% Current inflation rate:- 7% Potential real GDP:-$ 1.47trillion Real GDP:- $ 1.49 trillionThe Taylor Rule and inflation Suppose the initial inflation rate and inflation target are both 2%, that the real federal funds rate is 2%, and that the economy is at the full employment level of output. According the Taylor Rule, the federal funds target should be4% . Suppose now that the inflation rate changes to 4%. The Taylor Rule now prescribes that the federal funds target should be . Next, suppose that economists predict that the economy would be at full employment at a level of $14.00 trillion. However, the actual GDP in the United States is $12 trillion. Assuming that the inflation rate is still 4%, the Taylor Rule prescribes that the federal funds Expert AnswerSuppose that the equilibrium real federal funds rate is 5 percent and the target rate of inflation is 2 percent. Use the following information and the Taylor rule to calculate the federal funds rate target: Current inflation rate =7 percent Potential real GDP =$14.32 trillion Real GDP =$14.08 trillion The federal funds target rate is ______%. (Enter your response rounded to two decimal places.)
- K Suppose that the equilibrium real federal funds rate is 4 percent and the target rate of inflation is 1 percent. Use the following information and the Taylor rule to calculate the federal funds rate target: Current inflation rate = 6 percent Potential real GDP = $14.28 trillion Real GDP $14.29 trillion = The federal funds target rate is % (Enter your response rounded to two decimal places.)Suppose that the equilibrium real federal funds rate is 1 percent and the target rate of inflation is 3 percent. Use the following information and the Taylor.rule to calculate the federal funds rate target: Current inflation rate 2 percent Potential real GDP $14.93 trilion Real GDP $14.11 trillion The federal funds target rate is%. (Enter your response rounded to two decimal places)Economists sometimes argue that moderate inflation may help the economy by making wages in labor markets more ["", "", ""] . The discussion in the text pointed out that wages tend to be sticky in their downward movements and that unemployment can result. A little inflation could nibble away at ["", ""] wages, and thus help real wages to ["", ""] if necessary. In this way, even if a moderate or high rate of inflation may act as sand in the gears of the economy, perhaps a low rate of inflation serves as oil for the gears of the labor market. This argument is controversial. A full analysis would have to account for all the effects of inflation. It does, however, offer another reason to believe that, all things considered, very low rates of inflation may not be especially harmful.
- Suppose that the equilibrium real federal funds rate is 5 percent and the target.rate.of inflation is 1 percent. Use the folowing information and the Tayiorne to calculate the federal tunds rate target: Current inflation rate = 6 percent Potential real GDP = $14.61 trilion Real GDP = $14.17 trillion The federal funds target rate is %. (Entor your response rounded to two decimal places)What is the inflation rate? Year Money supply GDP Assume that the velocity of money is constant. (Write your answer in percentage. If your answer is 0.0222, write 2.22.) 2015 1,200 12,000 2016 1,220 12,550Supposed that followed by an unexpected discovery of new oil reserves there is a reduction in oil prices. What policy suggestion makes it possible to keep the inflation rate at its rate prior to the discovery without changing the target for federal funds rate? A)An increase in income taxes. B)An across the board decrease in corporate profit taxes. C)An open market purchase if reserves are scarce. D)An increase in ONRRP rate.
- Now go to FRED and search for PCEPI. This is the price index that receives the most attention from the Federal Reserve in terms of fulfilling the nominal part of their dual mandate. Calculate the most recent rate of inflation (12 months) using PCEPI to the nearest two decimal places and compare to the Fed's implicit target of inflation = 2%. Is inflation too high, too low, or just right (circle your answer)? TPCE Too high Too low Just rightSuppose the nominal interest rate on savings accounts is 11% per year, and both actual and expected inflation are equal to 2%. Complete the first row of the table by filling in the expected real interest rate and the actual real interest rate before any change in the money supply. Time Period Before increase in MS Immediately after increase in MS Nominal Interest Rate (Percent) 11 11 Expected Actual Inflation Inflation (Percent) (Percent) 2 2 2 to 7 The unanticipated change in inflation arbitrarily harms Expected Real Interest Rate (Percent) Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 2% to 7% per year. Actual Real Interest Rate (Percent) Complete the second row of the table by filling in the expected and actual real interest rates on savings accounts immediately after the increase in the money supply (MS). Now consider the long-run impact of the change in money growth and inflation. According to…Suppose there is an upward surge in consumer confidence. a) If the output gap is large and positive, the Fed should (Click to select) fed funds rate. the the fed funds b) If the output gap is negative, the Fed should (Click to select) rate. c) If the inflation rate is 6 percent per year, the Fed should (Click to select) fed funds rate. the Next> 16 of 19 < Prev tion 10:38 PM 10/5/2019