If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals, 12) Inflation targeting is a framework for carrying out monetary policy whereby. So if the inflation target was 2 percent, actual inflation was 3 percent, output was at its potential, and the real federal funds rate was 2 percent, the Taylor Rule suggests that the fed funds target should be fft = π + ff*r + ½ (π gap) + ½ (Y gap) fft = 3 + 2 + ½ (1) + ½ (0) fft = 5.5 Using the Quantity Theory of Money, what should be the annual growth rate of real money balance, M/P ? Fill in the blanks. 31) Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 2 percent, the current inflation rate is 4 percent, and real GDP is 2 percent above potential real GDP. This E-mail is already registered with us. The median projection of the long-run fed funds rate—essentially, an estimate of the neutral rate—has declined over time. (Quantity Theory of Money) Suppose that in China the velocity of money is constant, real GDP grows by 6% per year each year, the money stock grows by 10% per year, and the nominal interest rate is 6%. 213) Suppose the equilibrium real federal funds rate is 3 percent, the target rate of inflation is 3 percent, the current inflation rate is 1 percent, and real GDP is 8 percent below potential real GDP. A) is a more narrow, focused measure of inflation. Question: Suppose the equilibrium real federal funds rate is 2 percent, the current inflation rate is 4 percent, the target rate of inflation is 2 percent, and real GDP is 2 percent above potential real GDP. PiA – Physik im Advent 2020 – Aufgabe 12 Lösung. At $400 billion valuation, which is the biggest company ever to be added to the S&P500 Index. Equilibrium interest rate. B) the central bank commits to achieving a publicly announced level of inflation. D) is a fixed market-basket price index that does not allow the mix of products to change each year. Prime lending rate. Your email address will not be published. Suppose the equilibrium real federal funds rate is 5 percent, the target rate of inflation is 3 percent, the current inflation rate is 5 percent, and real GDP is 4 percent above potential real GDP. So if the inflation target was 2 percent, actual inflation was 3 percent, output was at its potential, and the real federal funds rate was 2 percent, the Taylor Rule suggests that the fed funds target should be fft = π + ff*r + ½ (π gap) + ½ (Y gap) fft = 3 + 2 + ½ (1) + ½ (0) fft = 5.5 B) is a chain-type price index that allows the mix of products to change each year. The federal funds rate is currently 4 percent. C) moved roughly together with the core PCE being the most stable. Which company introduced the hexagonal shape for pencils, which later became a norm? Assume that the equilibrium real federal funds rate is 2% and the target for inflation is 1%. Suppose that the demand for Federal funds curve is such that the quantity of funds demanded changes by $120 million for each 1 percent change in the Federal funds interest rate. A) core personal consumption expenditures price index. 11) Suppose the equilibrium real federal funds rate is 5 percent, the target rate of inflation is 3 percent, the current inflation rate is 5 percent, and real GDP is 4 percent above potential real GDP. Economic growth was moderate during the first half of the year, but the tightening of credit conditions has the potential to intensify the housing correction and to restrain economic growth more generally. D) Inflation targeting holds the Fed accountable for an inflation goal, but may make it less likely the Fed will achieve other goals. B) includes the prices of consumer goods, but not consumer services. C) includes the prices of industrial equipment. 17) The core personal consumption expenditures price index excludes, 18) The consumer price index (CPI), the personal consumption expenditures price index (PCE), and the core PCE have over the last 10 years. Since real GDP is 2 percentage points below potential GDP the Fed should lower the Federal funds rate by 1 percentage point. Discount rate. Suppose the Fed is following the Taylor rule, with an inflation rate of 3 percent over the past year. Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP equals potential GDP, then the federal funds target rate equals the; Suppose the equilibrium real federal funds rate is 2 percent, the current inflation rate is 4 percent; Chawhowhorge Brain Teaser This reduction is half a 1/2 a percentage point for each percentage point actual real GDP is below potential GDP. 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