Macroeconomics (7th Edition)
7th Edition
ISBN: 9780134738314
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 15, Problem 15.5.7PA
To determine
Reason for inaccurate estimation of federal fund rate by Taylor rule.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The mandate of the South African Reserve Bank (SARB) states that “the Reserve Bank is required to achieve and maintain price stability in the interest of balanced and sustainable economic growth in South Africa”.
There are several macroeconomic determinants that in many ways affect the outlook of the economy, such as inflation, growth, interest rates, unemployment and exchange rates. There has been an ongoing conversation among economists and politicians about the mandate of the SARB.
Do you think that the mandate of the SARB should change? Support your view.
According to Keynes, increasing the money supply should lower interest rates in the economy. Milton Friedman notes that while it is true that expansionary monetary policy can lower interest rates, it is only part of the story.
a. Briefly explain under what conditions an expansionary monetary policy will indeed lower interest rates, both in the short and long run. A graph may help answering this question.b. Briefly explain under what conditions an expansionary monetary policy will increase interest rates. A graph may help answering this question.
Briefly explain the policy trilemma of the Central Banks. Give examples of how different countries have positioned themselves with respect to the trilemma.
Chapter 15 Solutions
Macroeconomics (7th Edition)
Ch. 15 - Prob. 15.1.1RQCh. 15 - Prob. 15.1.2RQCh. 15 - Prob. 15.1.3RQCh. 15 - Prob. 15.1.4PACh. 15 - Prob. 15.1.5PACh. 15 - Prob. 15.1.6PACh. 15 - Prob. 15.1.7PACh. 15 - Prob. 15.2.1RQCh. 15 - Prob. 15.2.2RQCh. 15 - Prob. 15.2.3RQ
Ch. 15 - Prob. 15.2.4RQCh. 15 - Prob. 15.2.5RQCh. 15 - Prob. 15.2.6PACh. 15 - Prob. 15.2.7PACh. 15 - Prob. 15.2.8PACh. 15 - Prob. 15.2.9PACh. 15 - Prob. 15.2.10PACh. 15 - Prob. 15.3.1RQCh. 15 - Prob. 15.3.2RQCh. 15 - Prob. 15.3.3RQCh. 15 - Prob. 15.3.4PACh. 15 - Prob. 15.3.5PACh. 15 - Prob. 15.3.6PACh. 15 - Prob. 15.3.7PACh. 15 - Prob. 15.3.11PACh. 15 - Prob. 15.3.12PACh. 15 - Prob. 15.3.13PACh. 15 - Prob. 15.3.14PACh. 15 - Prob. 15.3.15PACh. 15 - Prob. 15.4.1RQCh. 15 - Prob. 15.4.2RQCh. 15 - Prob. 15.4.3PACh. 15 - Prob. 15.4.4PACh. 15 - Prob. 15.4.5PACh. 15 - Prob. 15.4.6PACh. 15 - Prob. 15.5.1RQCh. 15 - Prob. 15.5.2RQCh. 15 - Prob. 15.5.3RQCh. 15 - Prob. 15.5.4PACh. 15 - Prob. 15.5.5PACh. 15 - Prob. 15.5.6PACh. 15 - Prob. 15.5.7PACh. 15 - Prob. 15.5.8PACh. 15 - Prob. 15.5.9PACh. 15 - Prob. 15.6.1RQCh. 15 - Prob. 15.6.2RQCh. 15 - Prob. 15.6.3PACh. 15 - Prob. 15.6.4PACh. 15 - Prob. 15.6.5PACh. 15 - Prob. 15.6.6PACh. 15 - Prob. 15.6.7PACh. 15 - Prob. 15.6.8PACh. 15 - Prob. 15.6.9PACh. 15 - Prob. 15.2RDECh. 15 - Prob. 15.3RDE
Knowledge Booster
Similar questions
- According to Financial Times published on November 3, 2021, the UK government's Office of Budget Responsibility calculated that Brexit would cost 4% of GDP per annum over the long term. 4% of the 2021 UK GDP is the equivalent of a £32bn cost per annum to the UK taxpayer. The following case study provides the opportunity to show what you have learned up to this point specific to the EU, Brexit, and the British economy. Instructions Read Chapter 9, Closing Case: The Cost of Brexit (pp. 304-306). Write a minimum of 1-to 2-pages (double-spaced), not recapping the case history or repeating the material in the case. Make sure to address the following in your case study analysis: What have been the benefits of the EU to the British economy? What do you think have been the costs? Why did a majority of people in Britain apparently feel that it was in the best interest of the nation to exit the EU? There is evidence that the uncertainty surrounding the precise nature of the…arrow_forwardSuppose the economy of Macroland is described by the following:C = 200 + 0.8 DI (DI = disposable income)I = 300 + 0.2Y − 50r (Y = GDP)(r, the interest rate, is measured in percentage points. For example, a 9 percent interest rate is r = 9).For this economy, assume that the Federal Reserve uses its monetary policy to peg the interest rate atr = 5G = 750T = 0.25YX = 200M = 150 + 0.2YHint: DI = Y − T From Table 36-1, find the trade deficit or surplus. a. 75 surplus b. 475 surplus c. 475 deficit d. 75 deficitarrow_forwardIn describing how changes in income influence the supply of loans, we assumed that the increase in income occurs this year. Suppose instead that the increase in income will occur next year even though everyone in the economy knew it would happen today. How would the news of a future increase in income influence the current loan supply curve?arrow_forward
- Fiscal and Monetary Policies Nowadays, many Central Banks use target inflation in their monetary policy framework to achieve a stable and low level of inflation. Related to that, do you agree with the statement that says “by only focusing on achieving inflation target, the Central Bank will not be able to control the economy’s output fluctuation.” Explain your answer by using an appropriate theory, model/equationarrow_forwardFill in the blank. ALEX: Hi, Becky. I’m intrigued to see how macroeconomics allows us to explain recent economic events such as the Great Recession that affected so many people. But there’s one thing I don’t understand. Was the collapse of the housing bubble the only cause of the recession, or were there other factors as well? BECKY: Hi, Alex. I agree that macroeconomic theory offers an entirely new perspective on how the economy works. To answer your question, the crash of the housing market was a major factor but not the only cause of the Great Recession. The professor mentioned that the __________ (options: financial, fiscal, government) system deteriorated as well, an event that deepened the economic downturn even further. ALEX: I see. So the bursting of the housing bubble caused the initial decline in aggregate demand. Then the financial crisis caused aggregate demand to decline even more. Could you also help me understand how to use the aggregate demand and aggregate supply model…arrow_forward1) https://openstax.org/books/principles-macroeconomics-2e/pages/9-4-the-confusion-over-inflation 2) https://openstax.org/books/principles-macroeconomics-2e/pages/9-5-indexing-and-its-limitations please I need a short summary about these articles.arrow_forward
- briefly explain why the Federal Reserve's policies of quantitative easing and maintaining low interest rates after the 2008 financial crisis has had both positive and negative effects on the U.S. economy.arrow_forwardThe graph depicts a dynamic aggregate demand (AD) and aggregate supply (AS) model of the economy. Suppose that in 2003, the economy is in macroeconomic equilibrium, with GDP at GDP (year 1). The Fed projects that in 2004, the aggregate demand curve will be AD (year 2), that potential real GDP will be $12.45 trillion (GDP (year 2)), and that actual real GDP will be $12.39 trillion. By how much does projected potential real GDP exceed actual real GDP in 2004? difference: $.45 0 What could the Federal Reserve do to help the economy reach potential real GDP in 2004? trillion Conduct contractionary monetary policy to increase interest rates. Conduct expansionary monetary policy to decrease interest rates. It cannot aid the economy. Show on the graph what would change if the Fed is successful at implementing their policy. Price level LRAS (year 1) Year LRAS (year 2) Year 2 SRAS (year 1) GDP (year 1) Real GDP (trillions of $) SRAS (year 2) AD (year 1) GDP (year 2) AD (yeaarrow_forwardSylvia, a writer for a newspaper, interviewed top managers at 50 large corporations. All of the managers indicated that the primary determinant of planned investment is the interest rate and not their expected sales. In addition they all told her that their desired investment function is very flat. From this information, if Sylvia is a good macroeconomist, she would conclude that Group of answer choices neither expansionary nor contractionary monetary policy would be very effective. both expansionary and contractionary monetary policy would be very effective. fiscal policy would be very effective, but monetary policy would not be very effective. fiscal policy would not be very effective, but monetary policy would be very effective.arrow_forward
- Use the graph to answer the question that follows. Real GDP Potential real GDP T5 Time The government of Country 'X' is operating at point 'C' in T3. Which of the following events would move the economy from point 'C' to 'D'? Sharp rise in unemployment rate Increase in money supply Decrease in interest rates Rise in aggregate demand Decrease in import Actual real GDParrow_forward-Disposable income (DI) = GDP - NT 8. Imports (M) Rest of the world C+1 9. 7. Financial markets 10 5. Firms Governments Households 4. Taxes NT C+I+G+(X- M) = GDP Consumption (C) Investment () Saving (S) borrowing Government purchases (G) Exports (X) Government = GDP Aggregate income=0arrow_forwardHello, I need help with a macroeconomics question. Thank you in advance! The answers are based on a short exerpt from the Federal Reserves press release from Feb 1, 2023 (attatchde below). 7. What do you expect to happen to the money supply? 8. What do you expect to happen to the inflation rate? 9. How would you expect all these decisions to affect employment in the economy? 10. How do the effects you found on 8 and 9 align with what the Fed was hoping to attain?arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Principles of Economics (12th Edition)EconomicsISBN:9780134078779Author:Karl E. Case, Ray C. Fair, Sharon E. OsterPublisher:PEARSON
Engineering Economy (17th Edition)EconomicsISBN:9780134870069Author:William G. Sullivan, Elin M. Wicks, C. Patrick KoellingPublisher:PEARSON
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Managerial Economics: A Problem Solving ApproachEconomicsISBN:9781337106665Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike ShorPublisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...EconomicsISBN:9781259290619Author:Michael Baye, Jeff PrincePublisher:McGraw-Hill Education
Principles of Economics (12th Edition)
Economics
ISBN:9780134078779
Author:Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:9780134870069
Author:William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:9781337106665
Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-...
Economics
ISBN:9781259290619
Author:Michael Baye, Jeff Prince
Publisher:McGraw-Hill Education