What money growth rate should the fed aim for to hit

Assignment Help Business Economics
Reference no: EM13150879

Must answer all 4 parts and show all work: Suppose that the Fed’s inflation target is 2%, potential output growth is 3.5%, and the velocity is a function of how much the interest rate differs from 5%: % ?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% 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?

Reference no: EM13150879

Questions Cloud

Calculate the optimal money growth rate needed for the fed : 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.
Four types of classifications for non-influential : Identify three out of four types of classifications for non-influential investments in securities.
Should the government increase the minimum wage : Should the government increase the minimum wage? What should be the GUIDELINES for an increase? What are some of the disadvantages of an increase?
Company price-earnings ratio equals : A company has a market value per share of $73.00. Its net income is $1,750,000 and the weighted-average number of shares outstanding is 350,000. The company's price-earnings ratio equals:
What money growth rate should the fed aim for to hit : what money growth rate should the Fed aim for to hit its inflation target in that period? If the Fed instead maintained the money growth rate from part a, what is likely to happen to inflation.
Construct quantum mechanical operators : Construct quantum mechanical operators for the following observable: (1) the inverse separation 1/x
List of phone numbers of randomly selected expected voters : He came to work at 8:00 and began to make calls. By 11:00 a.m., his survey was done. Don't discuss what is not said. Discuss what is wrong with what is said.
How does change in consumer and producer surplus comapare : What happens to consumer and producer surplus when the sale of good is taxed? How does the change in consumer and producer surplus comapare to the tax revenue? As a result of the above are taxes necessary to have? Explain.
The rate at which a substance through a semipermeable : the rate at which a substance through a semipermeable membrance is determined by the diffusivity D(cm^2/s)of the gas . D varies the membrance temperature

Reviews

Write a Review

 

Business Economics Questions & Answers

  Fewer also fewer barriers to trade

With fewer also fewer barriers to trade, countries are able to focus on producing those goods also services which they are best.

  Government requires insurance

What kinds of people are most likely to have their utility reduced by such a law. Why do you think that the government requires such insurance.

  What is a cholesky decomposition of a matrix

What is an LU decomposition of a matrix and how can it be used to solve a system of linear equations. What is a Cholesky decomposition of a matrix.

  What percentile did you score in

the top ten percentile cutoff was 95 points. a. What is the standard deviation for the class? b. What percentile did you score in?

  Equilibrium ?price?and? quantity

Now? suppose? that? the ?first ?firm? has? a ?capacity ?of ?2 ?and? the? second? firm? has ?a ?capacity ?of ?4.

  Illustrate what is the firm total revenue

If the above monopolist were to behave like a perfectly competitive firm (operating in the long run), determine its output. Illustrate what is the firm's Total Revenue.

  Elucidate which have almost exactly the same ingredients

here are many liquid cold medicines, all of which have almost exactly the same ingredients. Yet medicines with brand names that the man recognizes from television commercials are for more than the unadvertised versions. Elucidate in economic terms..

  Analyze a market environment with tacit collusion

Analyze a market environment with tacit collusion, including deterrents from entry.2. Evaluate the profitability of entering the market.3. Examine how the time horizon affects the profitability of entering the market.

  How tax will increase goverment revenue

The legislature has stated that the $.03 tax will increase goverment revenue by $300,000 per month and raise the price of gasoline by $.03 per gallon. is this correct.

  A pattern of change in a particular market model

Select also research an industry where there has been a pattern of change in a particular market model

  Cooperate with its rival or cheat in every period of play

Every may either 'cooperate' with its rival or 'cheat' in every period of play. If both cooperate, they earn $100 every in that period.

  Role of the federal reserve in mitigating the negative impac

Assess the role of the Federal Reserve in mitigating the negative impact of the 2008 financial meltdown on the economy.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd