Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
expand_more
expand_more
format_list_bulleted
Question
Chapter 13, Problem 2E
(a)
To determine
Derive the personal consumption expenditure curve excluding food and energy.
(b)
To determine
Derive the personal consumption expenditure curve including food and energy.
(c)
To determine
Explain why the two measures are different.
(c)
To determine
Estimate the appropriate fed funds rate for the US economy.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
You're a pricing analyst for a manufacturing firm. You are tasked with predicting how average prices will change over the next
quarter to help your manager decide how to change her prices.
How might you find the best estimate of the likely inflation rate?
For the best estimate,
obtain the average forecast of many economists.
look to the financial markets.
analyze surveys of people's inflation expectations.
rely on the forecast of an eminent economist.
The Federal Reserve uses an inflation target of 2-3%; most economists agree that the US natural rate of unemployment is around 4.5%.
Imagine that you are a policy analyst observing the government and the Federal Reserve. You determine that inflation is 1% (very low) and unemployment is hovering around 6.5% (quite high.)
The Federal Reserve responds by cutting interest rates and beginning to buy government bonds in open-market operations.
The government takes the position that the only way out of a recession is to decrease government spending and passes a budget with very little spending (this is called "taking austerity measures").
What effects would the Fed's actions have, if taken alone? What effects would the government's actions have, if taken alone? What do you predict will occur when both actions are taken? Who do you think is making the right suggestion?
1) https://www.econlowdown.org/resource-gallery/monetary_policy_tools
2) https://www.wsj.com/articles/zimbabwe-money-aa13a052?mod=hp_featst_pos5
3) https://news.sky.com/video/jamaican-bank-releases-reggae-song-on-inflation-12058864
please I need a short summary of these articles.
Chapter 13 Solutions
Macroeconomics (Fourth Edition)
Knowledge Booster
Similar questions
- What Can the Fed Do about Inflation? In the article by Thomas Hogan, we learn that Russia's invasion of the Ukraine nor the shortage or supply chain issues has not derived the main causes of inflation. (Hogan, 2022) The main cause for the issues that we have been facing come directly from the constant price changes and the monetary policy that is currently in place. We learn that with Federal Open Market Committee (FOMC) has not adjusted their monetary policy, and have been raising the rates in such small increments that is causing the inflation to continue in an upward trend. What needs to occur is the FOMC needs to raise interest rates in greater scales in order the combat the inflation that is taking place and stabilize the price levels that are out there. (Hogan, 2022) What needs occur is that the Fed needs to come up with a policy that will allow for a predetermined path that slows down and regulating the money growth back to a safe place. Having the guidance from the article…arrow_forwardNow 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 rightarrow_forwardIn the short-run you know that firms and households expect inflation of 3.6% next year. There are no supply shocks and cyclical unemployment is 1.09%. Lambda is 0.5. With this information, what is the inflation rate today? Write your answer as a percentage, round at one (1) decimal, and do not write the percentage sign. Use a minus sign if needed.arrow_forward
- In March of 2020, the Bank of Canada dropped the policy interest rate three times. Were these action in line with an inflation control policy?arrow_forward1. The inflation-unemployment relationship The following graph shows the combinations of unemployment and inflation that existed in the United States for selected years between 1961 and 1969. Click on any blue point (circle symbol) on the graph to get its exact coordinates. You can also use the black point (cross symbol) to find the coordinates of other points along the curve. (Note: You will not be graded for any adjustments made to the graph.) NFLATION RATE (Percent) 5.0 4.5 4.0 3.5 3.0 2.5 20 1.5 1.0 0.5 0 3.0 3.5 1969 1968 1967 1965 4.0 1964 4.5 6.0 UNEMPLOYMENT RATE (Percent) 5.0 5.5 1963 6.5 1961 7.0 ?arrow_forwardAn economy's aggregate demand curve (the relationship between short-run equilibrium output and inflation) is described by the equation:Y = 15,000 - 12,000π, where π is the inflation rate. Initially, the inflation rate is 2 percent or π = 0.02. Potential output Yp equals 14,640.Note: Keep as much precision as possible during your calculations. Your final answer for inflation should be accurate to at least two decimal places and output should be accurate to the nearest whole number.a) Find inflation and output in short-run equilibrium. Inflation : 0%Output : $0 b) Find inflation and output in long-run equilibrium. Inflation : 0%Output : $0arrow_forward
- The Bank of Sweden inflation target is 2 % - which is a very common central bank goal. Why is it not zero percent?arrow_forwardIn 1979, when the fed was deciding how aggressively to fight inflation, the typical estimate of the sacrifice ratio was A) 5 B) 1 C) 10 D) 7arrow_forwardFrom various authoritative sources of inflation for the current year and the medium term. Decide which inflation estimate is most appropriate to use for banks in respect of both the inputs and the outputs. Comment on any differences between the input and output rates of inflation, the implications and consequences, and what action could be taken to enhance the banks position.arrow_forward
- You observe the following short-run Phillips curve for the economy: T = 9.2 -0.26(u - 6.5%) + v. There are no supply shocks to the economy, and the actual unemployment rate is 6.5% (and will stay that way for the foreseeable future). What will expected inflation be next year? Write your answer as a percentage, and round at one (1) decimal. Do not write the percentage sign. If you need more information to answer the question, write "O".arrow_forwardTurkey’s annual inflation rate soared to 36%, the highest since September 2002. According to data released by the Turkish Statistical Institute, December saw the year’s biggest increase in inflation, with consumer prices up almost 14% compared to the previous month. Despite a plummeting currency and runaway inflation, the country's President Recep Tayyip Erdogan has pursued an unorthodox economic policy in his belief that high interest rates cause inflation instead of helping combat it. He continues to insist on slashing interest rates.In conventional policy-making, if facing rising inflation then a country's central bank needs to increase interest rates to drive price increases down again. The higher the inflation, the higher rates need to go to combat it. Erdogan has often sought to justify his decision by quoting verses from the Koran which strictly forbids interest. Erdogan has once described interest rates as the "mother and father of all evil." "I cannot stand by those who defend…arrow_forwardTurkey’s annual inflation rate soared to 36%, the highest since September 2002. According to data released by the Turkish Statistical Institute, December saw the year’s biggest increase in inflation, with consumer prices up almost 14% compared to the previous month. Despite a plummeting currency and runaway inflation, the country's President Recep Tayyip Erdogan has pursued an unorthodox economic policy in his belief that high interest rates cause inflation instead of helping combat it. He continues to insist on slashing interest rates.In conventional policy-making, if facing rising inflation then a country's central bank needs to increase interest rates to drive price increases down again. The higher the inflation, the higher rates need to go to combat it. Erdogan has often sought to justify his decision by quoting verses from the Koran which strictly forbids interest. Erdogan has once described interest rates as the "mother and father of all evil." "I cannot stand by those who defend…arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
