Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 31, Problem 18APA
To determine
Determine the conflict among the Fed’s mandated policy goals.
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Students have asked these similar questions
1. The FED is facing a problem of inflation. What policy should be used? How would each of the tools at the FED's disposal be used?
2. The FED is facing a problem of unemployment. What policy should be used? How would each of the tools at the FED's disposal be used?
The FED is facing a problem of unemployment. What policy should be used? How would each of the tools at the FED's disposal be used?
The Fed's monetary policy strategy that focuses on achieving price stability is known as:
A.
Money supply management
B.
Inflation targeting
C.
Tax policy
D.
Currency exchange
Chapter 31 Solutions
Macroeconomics
Ch. 31.1 - Prob. 1RQCh. 31.1 - Prob. 2RQCh. 31.1 - Prob. 3RQCh. 31.1 - Prob. 4RQCh. 31.2 - Prob. 1RQCh. 31.2 - Prob. 2RQCh. 31.2 - Prob. 3RQCh. 31.3 - Prob. 1RQCh. 31.3 - Prob. 2RQCh. 31.3 - Prob. 3RQ
Ch. 31.3 - Prob. 4RQCh. 31.4 - Prob. 1RQCh. 31.4 - Prob. 2RQCh. 31.4 - Prob. 3RQCh. 31.4 - Prob. 4RQCh. 31.4 - Prob. 5RQCh. 31 - Prob. 1SPACh. 31 - Prob. 2SPACh. 31 - Prob. 3SPACh. 31 - Prob. 4SPACh. 31 - Prob. 5SPACh. 31 - Prob. 6SPACh. 31 - Prob. 7SPACh. 31 - Prob. 8SPACh. 31 - Prob. 9SPACh. 31 - Prob. 10SPACh. 31 - Prob. 11SPACh. 31 - Prob. 12SPACh. 31 - Prob. 13SPACh. 31 - Prob. 14SPACh. 31 - Prob. 15SPACh. 31 - Prob. 16APACh. 31 - Prob. 17APACh. 31 - Prob. 18APACh. 31 - Prob. 19APACh. 31 - Prob. 20APACh. 31 - Prob. 21APACh. 31 - Prob. 22APACh. 31 - Prob. 23APACh. 31 - Prob. 24APACh. 31 - Prob. 25APACh. 31 - Prob. 26APACh. 31 - Prob. 27APACh. 31 - Prob. 28APACh. 31 - Prob. 29APACh. 31 - Prob. 30APACh. 31 - Prob. 31APACh. 31 - Prob. 32APACh. 31 - Prob. 33APACh. 31 - Prob. 34APACh. 31 - Prob. 35APACh. 31 - Prob. 36APACh. 31 - Prob. 37APACh. 31 - Prob. 38APACh. 31 - Prob. 39APACh. 31 - Prob. 40APACh. 31 - Prob. 41APA
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- 3. The long-run effects of monetary policy The following graphs plot the long-run equilibrium situation for an economy. The first graph plots the aggregate demand (AD) and long-run aggregate supply (URAS) curves. The second graph plots the long-run and short-run Phillips curves (LRPC and SRPC, respectively). (?) PRICE LEVEL INFLATION RATE 0 2 3 4 OUTPUT (Trofdara) 9 UNEMPLOYMENT HATE (P) AD SHPC AD - The long-run effect of the central bank's policy is in real GDP LHAS SHPC LAPC (?) Which of the following statements are true based on these graphs? Check all that apply. The natural level of output is $6 trillion. The current quantity of output is greater than potential output. The unemployment rate is currently 9% higher than the natural rate of unemployment. Suppose the central bank of the economy pursues a policy that increases the money supply. Show the long-run effects of this policy on both of the graphs by shifting the appropriate curves. in the inflation rate, in the unemployment…arrow_forward. The Fed chairman pursued aggressive policies to tackle the problem of unemployment. As a consequence the output gap rose by 15% in year one but dropped by 3% in year two. However, theinflation in these two years rose from was 2% to 6% in two years. (a) Calculate the sacrifice ratio (b) Calculate the impact on unemploymentarrow_forward1. How do you think Fed policy might change if it included energy and food prices in its measure of the price level? 2. What two features of the Indian economy meant that an increase in rice prices was likely to spread through the economy and influence the overall inflation rate?arrow_forward
- What short-run tradeoff does the Fed face when it tries to achieve its dual mandate? The Fed faces a tradeoff between A. the money growth rate and real GDP growth rate B. the inflation rate and unemployment rate C. keeping prices stable and moderating interest rates D. changing tax revenues and balancing the government’s budgetarrow_forward1. The central Bank announces that it expects inflation to be relatively low while unemployment rises in the following months. What you be an expected monetary policy action as a result of this forecast? a. increase government spending b. decrease the discount rate c. increase the reserve ration d. sell bonds on the open market e. decrease marginal income tax rates 2. The long-run Phillips Curve indicates that there is no relationship between inflation and unemployment in the long run. Therefore, which of the following would cause an increase in the natural rate of unemployment and shift the LRPC to the right? a. An increase in unemployment benefits for the long-term unemployed. b. The elimination of various social welfare programs. c. A decrease in the duration of unemployment d. An increase in core inflation rates e. Expansionary monetary policiesarrow_forwardA well-known economic model called the Phillips Curve (discussed in The Keynesian Perspective chapter) describes the short run tradeoff typically observed between inflation and unemployment. Based on the discussion of expansionary and contractionary monetary policy, explain why one of these variables usually falls when the other rises.arrow_forward
- Contractionary Monetary Policy Assume that the economy is currently in short run equilibrium but experiencing an inflationary gap. Graphically illustrate the problem Identify the combination of monetary policies that the Federal Reserve would pursue to correct problem Graphically illustrate and explain how these monetary policies affect (1) the Market for Reserves, (2) the Market for M1, and (3) the Market for Real Goods and Services (AD-AS) Make sure that you identify the Fed’s goals/objectives and also graphically illustrate the solution.arrow_forward3. The long-run effects of monetary policy The following graphs show the state of an economy that is currently in long-run equilibrium. The first graph shows the aggregate demand (AD) and long-run aggregate supply (LRAS) curves. The second shows the long-run and short-run Phillips curves (LRPC and SRPC). LRAS AD LRAS AD 4 6. 8. 10 12 OUTPUT (Trillions of dollars) PRICE LEVEL 2.arrow_forwardAdditional Problem 7 The velocity of circulation is constant, real GDP is growing at 2 percent a year, the real interest rate is 3 percent a year, and the nominal interest rate is 4 percent a year. Calculate the inflation rate, the growth rate of money, and the growth rate of nominal GDP. Question Help The inflation rate is percent a year. Enter your answer in the answer box and then click Check Answer. parts remaining Clear All Check Answer MacBock Al DII D 吕0 888 F12 F10 F7 F8 F9 F5 F6 F4 esc F2 F3 F1 & ! @ # $ 4 1 Y Q W E tab K F G S caps lock B N M C V * 00 R %24arrow_forward
- Use the Front Page to answer three questions. FRONT PAGE Fed Raises Key Interest Rate Washington D.C.-The Fed, as expected, raised the target rate on federal funds from 2.25 to 2.5 percent today. Fed chair Jay Powell said the economy appeared "healthy" and "solid" enough to accommodate a small increase in interest rates. The Fed's goal is to keep inflation under control as the economy continues to grow and unemployment falls to historic levels. President Trump reacted immediately to the Fed action, calling it "foolish" and "crazy" - an impediment to stronger growth and still more jobs. Source: News reports of December 19-20, 2018. Instructions: Round your response to two decimal places. a. What was the Fed's target for the fed funds rate in late December 2018? % b. This was (Click to select) from the previous period. c. This rate change would (Click to select) aggregate demand.arrow_forwardExplain The FED's inflation Targetarrow_forward24. Even with the power to change interest rates, the Fed is unable to directly impact inflation, output or unemployment. This is because: a. Interest rates do not affect inflation, output and unemployment Interest rates have no influence on the economy b. c. Interest rates determine the opportunity cost of spending money today Inflation, output and unemployment are fixed d. e. None of thesearrow_forward
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