Macroeconomics
13th Edition
ISBN: 9780134735696
Author: PARKIN, Michael
Publisher: Pearson,
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Chapter 31, Problem 33APA
To determine
Identify the inflation expectation between 2009 2017.
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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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- How does a monetary policy of inflation target work?arrow_forwardDifferentiate between the General Inflation Rate and Specific Inflation Rate?arrow_forwardOn March 20, 2024, the statement that best describes the Federal Reserve's stance on inflation and interest rates for 2024 is: Inflation is on a road to %. Choose the words that best fill in the blanks. Multiple Choice moving down slowly, sometimes bumpy, 2% moving down slowly, sometimes bumpy, 3% moving down slowly, smooth, 3% moving down quickly, sometimes bumpy, 2% moving down quickly, sometimes bumpy, 3% Prev 15 of 18 Next>arrow_forward
- Now 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_forwardAnswer the two questions below. 1. What action should the Federal Open Market Committee (FOMC) take if it sees signs of inflation rising above 2% and believes inflation will continue to rise if it takes no action? 2. Explain how the action you suggest will work to control inflation.arrow_forwardYou'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.arrow_forward
- You take out student loans to help pay for your degree at a 5% annual interest rate. Assume the bank expected inflation to average 3% per year. What real interest rate did they expect to earn from your loan? What happens if inflation is actually 5% per year? Who is better off if inflation is higher than expected? What if it is lower than expected? Why?arrow_forwardHow is the interest rate affected by an increase in expected inflation? Explain.arrow_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
- 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?arrow_forwardSuppose the nominal interest rate on savings accounts is 11% per year, and both actual and expected inflation are equal to 2%. Complete the first row of the table by filling in the expected real interest rate and the actual real interest rate before any change in the money supply. Time Period Before increase in MS Immediately after increase in MS Nominal Interest Rate (Percent) 11 11 Expected Actual Inflation Inflation (Percent) (Percent) 2 2 2 to 7 The unanticipated change in inflation arbitrarily harms Expected Real Interest Rate (Percent) Now suppose the Fed unexpectedly increases the growth rate of the money supply, causing the inflation rate to rise unexpectedly from 2% to 7% per year. Actual Real Interest Rate (Percent) Complete the second row of the table by filling in the expected and actual real interest rates on savings accounts immediately after the increase in the money supply (MS). Now consider the long-run impact of the change in money growth and inflation. According to…arrow_forwardQuestion 1 a. Increasing prices erode the purchasing power of the dollar. It is interesting to compute what goods would have cost at some point in the past after adjusting for inflation. Go to the Federal Reserve Bank of St. Louis, FRED database website at https://research.stlouisfed.org/fred2/and find the consumer price index for all urban consumers. What would a car that cost $25,000 today have cost the year 1996? b. Many countries have central banks that are responsible for their nation’s monetary policy. Go to www.bis.org/cbanks.htm and select one of the central banks (for example, ECB, Norway). Review that bank’s Web site to determine its policies regarding application of monetary policy. How does this bank’s policies compare to those of the U.S. central bank?arrow_forward
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