Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Chapter 14, Problem 10RQ
To determine
To know: The Taylor rule description and variables for interest rate and it’s performance.
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Use the following Taylor rule to calculate what would. happen to the real interest rate if the administered interest rate decreases by 1 percentage point.
r = p + 0.5y + 0.5(p - 2) + 2
How – through which macroeconomic channels do interest rates affect markets for goods and services?
If an analyst was considering the effects of interest rates on future direction of the economy, would she focus on the short rates as controlled by the central bank, or long rates as controlled by the market and why?
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