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Targeting the Price Level with Supply Shocks. Suppose the Fed has brought the inflation rate down to zero to stabilize the price level. An adverse supply shock (such as an increase in the world price of oil) now hits the economy.
a. Using the aggregate demand-and-supply model, show how targeting the price level would make the fall in output from the shock greater as compared to no policy at all.
b. Some proponents of price-level or inflation targeting recommend that the Fed target core inflation, which is based on a price index that excludes supply shocks. What is their rationale?
There are 300 purely competetive farms in the local dairy market. Of the 300 dairy farms, 298 have a cost structure that generates profits of $24 for every $300 invested. What is their percentage rate of return
The demand for bottled water in a small town is as follows: Price per bottle Quantity demanded $1.00 500 $1.50 400 $2.00 300 $2.50 200 $3.00 100 1. Is this a straight line demand curve How do you know
Based on both research and the above figures, briefly discuss whether the country you have been assigned to and Australia was hurt more by the GFC in terms of changes in real GDP and unemployment.
The balance sheet of a bank follows. Suppose that the reserve requirement is 3 percent on the f rst $30 million of checkable deposits and 10 percent on checkable deposits in excess of $30 million. (Amounts on the balance sheet are in millions of d..
an automobile -manufacturing company is considering purchasing an industrial robot to do spot welding , which is currently done by skilled labor . the initial cost of the robot is $210,000, and the annual labor savings are projected to be $150,000
Why don't policymakers want to adopt rules for monetary policy?
Suppose your company is considering three health insurance policies. The first policy requires no tests and covers all preexisting illnesses. The second policy requires that all covered employees test negative for the HIV virus.
Suppose that technophiles are willing to pay $400 now for the latest iphone, but only $300 if they have to wait a year. Normal people are willing to pay $250 and their desire to purchase doesn't vary with time.
1. Find average cost and average for each of these total cost curves: a. TC = 10 + 2Q, b. TC = 5 + 3Q, c. TC = 20 - Q + 2Q2, 2.A firm's marginal cost of production is at $5 per unit, and its fixed costs are $20. Draw its total, average, and average..
Kal Tech Engineering is investigating the possibility of acquiring new automated packaging equipment at a cost of $12,000. The equipment will have a salvage value of $1,000 at the end of its useful life of 10 years. It is determined by the plant e..
What are the implications of these measures for government economic policies?
If the current stock of capital is fixed at 250 units, how many full-time workers should the firm employ if the weekly salary of each full-time worker (w) is $400 per week Compute the firm's level of output and profits per week in this short-run e..
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