Question

Discuss the implications of a higher degree of uncertainty about the effects of monetary policy on output. What would happen if the range of model predictions increased?

Answer 1

Answer:

implications of a higher degree of uncertainty about the effects of monetary policy on output:-

The FED Has weapon in the form of monetary policy by which it controls deflation , inflation , Recession ,economic growth .

When the countrys highest bank FED Decide to change the Monetary policy it may have uncertainties and risk on the outcome and

A. it can shocks account for probably less than 25% of the variance for the 1-year or more ahead forecast revision of real output, and may easily account for less than 2% at any given horizon.It usually takes even longer for monetary policy to affect inflation rates, because businesses tend to adjust their prices over time, and in response to a number of considerations.

B, The GDP price deflator falls only slowly following a contractionary monetary policy shock.

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