Is the Fed’s goal to reach zero inflation? Explain How do changes in the fed funds...

Is the Fed’s goal to reach zero inflation? Explain

How do changes in the fed funds rate affect the economy? How long before changes in the fed funds rate affect the economy? How much does the Fed change the fed funds rate normally?

Does the Fed Chair set monetary policy?

Why isn’t the money supply in the game?

What is the discount rate? Why is the discount rate not included in the game?

Does this game match how monetary policy is set in the real world? How does the Chair the Fed Gamesimplify the real world?

Solutions

Expert Solution

Q1- Is the Fed’s goal to reach zero inflation? Explain

Answer: yes, Fed’s goal is to reduce the inflation rate to zero percent so that it can reduce unemployment rate and price level in the economy.

Q2- How do changes in the fed funds rate affect the economy? How long before changes in the fed funds rate affect the economy? How much does the Fed change the fed funds rate normally?

Answer: fed fund rate means interest rate charged by the central bank. Fed fund rate affect the economy as it changes the supply and cash flow of money in the economy. It is an important tool of fed to control economic growth. Generally the fed fund rate affects the economy within 12 to 18 months. The fed changes the fund rate as for the economic conditions and the open market committee set the fed fund rates and current rate is 1.5%.

Q3- Does the Fed Chair set monetary policy?

Answer: yes the fed states the monetary policy

Q4- Why isn’t the money supply in the game?

Answer: the money supply is not in the game as supply of money creates huge effects

Q5- What is the discount rate? Why is the discount rate not included in the game?

Answer: discount rate is the rate at which Federal Reserve charge commercial banks for their loans. It is not in the game as it affects money supply in the economy.

Q6- Does this game match how monetary policy is set in the real world? How does the Chair the Fed Gamesimplify the real world?

Answer: No. the match does not match with monetary policy set in real world. the chair fed simplify the real world by fiscal and monetary policy

Rahul Sunny answered 1 year ago

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