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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?
The Wozniak Corporation, a maker of aircraft engines, determines that in 2008 the demand curve for its product is as follows-What is the price elasticity of demand if price equals $500?
For each of the following concepts provide a definition, a complete explanation as to their significance, and a practical example.
During the recent recession, when countries around the world suffered high unemployment rates and the governments were experiencing huge budget deficits, economists debated whether to raise or cut taxes or to raise or cut government spending.
Since 1990, energy use per person has either remained fairly stagnant or has increased in different nations and regions of the world. Match the nation or region with the trend in energy use per person since about 1990. Column preview China. increa..
Assume that the nominal wage rate equals 60. In the short-run, aggregate demand and aggregate supply are equal at a price level of 1.0.
Find the Present Value of each of the two following sets of cash flow events and what is the total interest chargeable in each mortgage?
Assume the effects on salaries and employment of such agreements. Also, indicate some of the reasons why they may be difficult to enforce.
The total operating revenues of a public transportation authority are $100 million while its total operating costs are $120 million. The price of a ride is $1 dollar and the price elasticity of demand for public transportation has been estimated t..
As we all know, at current it is illegal for parents who want to adopt a child to pay the birth mother for, or to offer to pay for, the babies they adopt.
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.
Is a monopolist subject to any competitive pressures? Explain. Would an unregulated monopolist have an incentive to operate and produce efficiently why or why not 2-)Are the following statements both correct Are they inconsistent with each other a..
Yet after telling the bank of his conditions the bank refuses to hire Gorton. He sues based on the Americans with Disability Act (ADA). Who wins and why? Would it matter if Gordon never told the bank about his HIV and allergies? If no, why not? If..
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