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Consider the fact that since 2015 till the end of 2017 the central bank of Russia...

Consider the fact that since 2015 till the end of 2017 the central bank of Russia managed to reduce the inflation rate drastically from 16%, keeping it within their target of 4%. Also, it has been noted that after two years of recession the economy started to grow in 2017. Some commentators viewed the decline in inflation as resulting from a deliberate policy of the central bank to be more aggressive in fighting inflation. Answer the following questions: (i) How can the policy reaction function be used to analyse the action of the Russian central bank? (ii) Using the AD-AS model outline the impact of the actions of the Russian central bank on the economy’s output in the short and long run.

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Rahul Sunny answered 1 year ago
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