Assume the inflation rate is 6% and there is every indication that price levels will continue to rise. The Fed should engage in which policy with respect to open market operations: Buy bonds. Sell bonds. Increase reserve ratio Decrease reserve ratio
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- If real GDP is $18.9 Trillion, potiental real GDP is $18.8 Trillion, and the current inflation rate is 4.2%, what is currently happening in the economy and what FED response is expected?when the growth rate of the money supplt is decreased, interest rates will fall immediately if the liquidity effect is _____ than the other money supply effects and there is _____ adjustment of expected inflation. larger; fast smaller; fast larger; slow smaller; slowWhat does the Taylor rule imply that policymakers shoulddo to the fed funds rate under the following scenarios?a. Unemployment rises due to a recession.b. An oil price shock causes the inflation rate to rise by1% and output to fall by 1%.c. The economy experiences prolonged increases inproductivity growth while actual output growth isunchanged.d. Potential output declines while actual output remainsunchanged.e. The Fed revises its (implicit) inflation target downward.f. The equilibrium real fed funds rate decreases.
- the money supply of Freedonia this year is $150 billion nominal GDP is $750 billion .assuming that velocity of money is stable. real GDP gross 2%this year. and money supply does not change what are the velocity, price level, and inflation rateThe NBER says the economy went from a peak in December 2007 to a trough in June 2009, until hitting a peak in the fourth quarter of 2019, then a trough in April 2020, and improving since then. Given this description of the dates of the business cycle, does the Fed’s policy of changing the discount rate make sense? Why or why not? Only typed answer and don't use chat gpt to solve the problemExplain The FED's inflation Target
- The Fed is likely to have the higher federal funds rate target range in situation _______ because the higher federal funds rate _______. A. B ; increases the recessionary gap and lowers the core inflation rate B. A ; increases the inflationary gap and lowers the core inflation rate C. A ; decreases the inflationary gap and lowers the core inflation rate D. B ; decreases the recessionary gap and lowers the core inflation rate Thanks!Supposed that followed by an unexpected discovery of new oil reserves there is a reduction in oil prices. What policy suggestion makes it possible to keep the inflation rate at its rate prior to the discovery without changing the target for federal funds rate? A)An increase in income taxes. B)An across the board decrease in corporate profit taxes. C)An open market purchase if reserves are scarce. D)An increase in ONRRP rate.Price stability: Suppose you are the head of the central bank and your mandateis to maintain the price level at a constant value. Explain what you would doto the money supply in response to each of the following events:(a) Real GDP increases by 4% during a boom.(b) Real GDP declines by 1% during a recession.(c) Real GDP is growing at 3% per year.(d) Te velocity of money increases by 2%.(e) Te velocity of money declines by 1%.
- Assume that the unemployment rate decreases substantially and that there is very high inflation. Which of the following is a tool of the Fed that is the least likely, to be used to influence the economy? an increase in the discount rate O a decrease in transfers a decrease in Government spending an increase in tax rates an increase in the RRRWhich of the following Fed policies (actions) would help reduce inflation? A) Open market purchases of government securities. B) An increase in the federal funds rate. OC) A decrease in reserve requirements. D) A decrease in discount rate.When the growth rate of the money supply is decreased, interest rates wil rise immediately if the liquidity effect is ____ than the other money supply effects and there is ______ adjustment of expected inflation. larger; fast smaller; slow larger; slow smaller; fast