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Suppose that the Fed's inflation target is 2 percent, potential output growth is 3.5 percent, and velocity is a function of how much the interest rate differs from 5 percent: % ?V = 0.5 x (i - 5) Suppose that a model of the economy suggests that the real interest rate is determined by the equation R= 8.5 - % ?Y Where Y is the level of output, so % ?Y is the growth rate of output. Suppose that people expect the Fed to hit its inflation target. a. Calculate the optimal money growth rate needed for the Fed to hit its inflation target in the long run. b. In the short run, if output growth is just 2 percent for two years and the equation determining the real interest rate changes to r = 4.5 - % ?Y, what money growth rate should the Fed aim for to hit its inflation target in that period? c. If the Fed instead maintained the money growth rate from part a, what is likely to happen to inflation? d. Which policy do you think is better in the short run? Which is better in the long run?
You're the manager of copies are us. The only copy store in town, the carbon copy, recently got bids on adding a colour copier.
Solve for the price and quantity that the monopolist would choose to maximize its profit under the more advanced technology. And also calculate the resulting profit.
Sometimes market activities (production, buying, and selling) have unintended positive or negative effects outside the market's scope. These are called externalities. As a policy maker concerned with correcting the effects of gases.
Would you rather earn a 4 % nomical or 4% real interest rate? Illustrate by describing the difference between nominal and real variables.
what determines a nation's real aggregate income According to the classical model of income determination, what determines a nation's real aggregate income What accounts for the difference between the two models
Assume the marketing environments of each country comprising but not limited to cultural, political, legal, and economic influences.
Suppose, in a given week, float raises $900 million, Treasury deposits at the Fed rise $1500 million, discounts and advances decline $200 million, and foreign deposits at the Fed increase $150 million.
Environmental education activities seek to change consumers' behavior to be more environmentally friendly , even when price and income are constant.What in this model of consumer demand are the environmental educators trying to change
Suppose that technophiles are willing to pay $400 now for the latest iPhone, but only $300 if they have to wait a year then compute the optimal pricing scheme of the iPhone.
Explain how much should the firm charge to earn the maximum profit during off peak times.
The citizens of Balaland used to pave 120 miles of roadways each year. After government of Balaland start paving 100 miles of roadways each year itself,
The theory of purchasing-power parity primarily explains 1. why a change in the real exchange rate changes a country's net exports. 2. why trade deficits tend to move to zero over time. 3. how foreign prices affect domestic prices. 4. the determinati..
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