The beautiful and wow expert Hand written solution is not allowed. 5Suppose that in 1980, the U.S. inflation rate was 13 percent and the unemployment rate reached 8 percent. Suppose that the targetrate of inflation was 2.5 percent back then and the full-employment rate of unemployment was 5.5 percent at that time. What valuedoes the Taylor Rule predict for the Fed's target interest rate?Instructions: Enter your answer rounded to 2 decimal places.35.65 percent

Here's how to calculate the target interest rate using the Taylor Rule:Taylor Rule equation (basic…

Answered: 5 Suppose that in 1980, the U.S.…

MACROECONOMICS

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Chapter17: The Trade-off Between Inflation And Unemploy

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What kind of monetary policy should the Fed use if the economy is currently in the northwest area of the bullseye chart? O Expansionary. ONeither expansionary nor restrictive O Restrictive O Expansionary and restrictive
According to the Taylor rule, if the current inflation rate is 5 percent and the current unemployment rate is 3.8 percent, the Fed's targeted interest rate should be Multiple Choice O O O 8.8 percent. 9 percent. 5 percent. 1.2 percent.
es Q Suppose that inflation is 2 percent, the Federal funds rate is 4 percent, and real GDP falls 2 percent below potential GDP. Acording to the Taylor rule, in what direction and by how much should the Fed change the real Federal funds rate? According to the Taylor rule, the Fed should increase the Federal funds rate by 6.5 percentage point. 4 A F2 C 2 N Search W S F3 # 3 X alt DII E F4 D $ 4 C R F % 5 < Prev **** V F6 T G 6 of 26 F7 Y B & V 7 H --- G FB N Next * 00 8 J F9 M prt sc ( a K F10 home O V F11 L alt end P V F12 | T ctrl m insert [ +11 ? 1 delete 1
12. Suppose the actual inflation rate is 3 percent points, the Fed's inflation target is 4 percent points, and unemployment is 1 percent below the Fed's unemployment target (in this case, the information given states the unemployment gap is 1 percent). According to the Taylor rule, what value will the Fed want to set for its target interest rate? Keep in mind that the Fed aims for the full-employment rate of unemployment, which is currently around 4 to 5 percent and a target rate of inflation, which is currently set at 2 percent per year. According to the Taylor rule, the Fed should ( raise, lower ) the target interest rate by percentage point.
5 You are an FOMC member, and you know that, in the last few recessions, the Fed cut interest rates by around 500 basis points. As the pandemic loomed in early 2020, the bottom of the Fed Funds target range was at 1.5 percent (the Fed only had around 150bp room to cut), while PCE inflation (your favourite inflation measure) was near the 2 percent target. What other options were available to the Fed? How do they work?
Which monetary policy tool can the Federal Reserve use to conduct an expansionary monetarypolicy (please state at least one instrument)? Which monetary policy instrument can the Fed useto conduct a restrictive monetary policy? Assume the country is experiencing highunemployment and a recession, such as during 2001, 2008-2009, and 2020. What is the Fedlikely to do in this scenario? Discuss the effects of such policy on the economy. Can you givea specific example to what the Fed did during any of those recessions? This is not a writing, it is economic.
Suppose a given country experienced low and stableinflation rates for quite some time, but then inflation picked up and over the past decade had beenrelatively high and quite unpredictable. Explain howthis new inflationary environment would affect thedemand for money according to portfolio theories ofmoney demand. What would happen if the governmentdecided to issue inflation-protected securities?
Assume that the fed adopts an inflation-targeting strategy. if oil prices rive abruptly by 20percent in response to an oil shortage, describe how the fed's monetary policy would be affected by this situation. do you think the inflation-targeting would be more or less effective in this case than if the fed balances its inflation concerns with unemployment concerns? explain?
If a central bank wants to make sure that its policy actions are successful in manipulating interest rates to stabilize an economy around its full-employment level, it should Multiple Choice O be prepared to make modest and frequent adjustments after receiving feedback on how its actions affect the economy never announce its intentions, because financial markets will always overreact frequently change its policies to keep financial markets guessing O react to a high rate of Inflation but not to an economic boom focus on Inflation and output gap equally
If the COVID-19 recovery continues and inflation starts to rise, what effect would a decision by the Fed to not change the federal funds rate target range have on the U.S. economy? If the Fed decides to leave the federal funds rate target range unchanged, we would expect _______. A. deflation to occur and the unemployment rate to increase B. the recessionary gap to increase C. potential GDP to increase and the full-employment quantity of labor to increase D. inflation to increase and the unemployment rate to decrease Thanks!
What is the advantage of Fed transparency, the Fed's communication strategy since 2012, of clear communication about its actions and interpretations of data? Since inflation expectations are a key determinant of inflation, molding those expectations through communication of Fed intentions is potentially a powerful tool of monetary policy. OIt reflects the culture of corporate transparency that has emerged in America in recent decades. O By creating expectations about future Fed policy, the Fed can catch people off-guard by upsetting those expectations, thereby achieving various policy objectives. O It exemplifies irrational economic behavior-a topic explored by behavioral economists.
During 2001-2004, the Fed injected additional reserves into the banking system, which reduced the federal funds rate and other short-term interest rates. Other things constant, what is the most likely short-run impact of this policy? an increase in the rate of unemployment O a reduction in the growth of employment an increase in aggregate demand and real GDP O a reduction in the long-run rate of inflation

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