Macroeconomics
10th Edition
ISBN: 9780134896441
Author: ABEL, Andrew B., BERNANKE, Ben, CROUSHORE, Dean Darrell
Publisher: PEARSON
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Question
Chapter 14, Problem 4NP
a)
To determine
Value of federal funds
b)
To determine
Value of federal fund rate.
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Students have asked these similar questions
Suppose that the next FOMC meeting is coming up in a few days and the official inflation and output gap numbers have just been released. The current federal funds rate is 1.25%, the long-term fed funds rate target is 3.25%, and the inflation rate target is 2%. According to the release, inflation is currently at 1.25 percent and the output gap is -0.5 percentage points.
Given the information above, the expected federal funds rate is _____ percent.
What does the Taylor rule imply that policymakers should do to the fed funds rate under the following scenarios?
Unemployment rises due to a recession.
An oil price shock causes the inflation rate to rise by 1% and output to fall by 1%.
The economy experiences prolonged increases in productivity growth while actual output growth is unchanged.
Potential output declines while actual output remains unchanged.
The Fed revises its (implicit) inflation target downward.
The equilibrium real fed funds rate decreases.
Q7.On the basis of an assessment of the current and
evolving macroeconomic situation, the Monetary
Policy Committee (MPC) at its meeting today
(December 4, 2020) decided tokeep the policy repo rate
under the liquidity adjustment facility (LAF)
unchanged at 4.0 percent.Consequently, the reverse
repo rate under the LAF remains unchanged at 3.35 per
cent and the marginal standing facility (MSF) rate and
the Bank Rate at 4.25 per cent. Assess the present
liquidity scenario in India and give your opinion about
the impact of this reduction on money supply and also
suggest other measures that RBI can take in recent
times to maintain liquidity.
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