Question
In: Economics
a. Inflation in the country of Hypothetica is currently 5%, below the target range of its...
a. Inflation in the country of Hypothetica is currently 5%, below the target range of its central bank. (i) What does this tell you regarding Hypothetica’s likely output gap? Illustrate it using an AS-AD diagram, and briefly explain your diagram In this situation, what is the central bank likely to do with regard to monetary policy? Briefly explain your answer and state also what is likely to occur to the price level and output at the end of this process (there is no need to draw a diagram, but you can if you feel it helps you explain your answer) What happens if the central bank does not intervene? Will the economy eventually return to long-run equilibrium (potential GDP)? Briefly explain your answer and state also what is likely to occur to the price level and output at the end of this process (there is no need to draw a diagram, but you can if you feel it helps you explain your answer).
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
Inflation in the country of Hypothetica is currently 5%, below the target range of its central...
Inflation in the country of Hypothetica is currently 5%, below
the target range of its central bank.
(i) What does this tell you regarding Hypothetica’s likely
output gap? Illustrate it using an AS-AD diagram, and briefly
explain your diagram
(ii) In this situation, what is the central bank likely to do
with regard to monetary policy? Briefly explain your answer and
state also what is likely to occur to the price level and output at
the end of this process...
Inflation in the country of Hypothetica is currently 5%, below the target range of its central...
Inflation in the country of Hypothetica is currently 5%, below
the target range of its central bank.What does this tell you
regarding Hypothetica’s likely output gap? Illustrate it using an
AS-AD diagram, and briefly explain your
diagram
In this situation, what is the central bank likely to do with
regard to monetary policy? Briefly explain your answer and state
also what is likely to occur to the price level and output at the
end of this process (there is no...
Inflation in the country of Hypothetica is currently 5%, below the target range of its central...
Inflation in the country of Hypothetica is currently 5%, below
the target range of its central bank.
What does this tell you regarding Hypothetica’s likely output
gap? Illustrate it using an AS-AD diagram, and briefly explain your
diagram
In this situation, what is the central bank likely to do with
regard to monetary policy? Briefly explain your answer and state
also what is likely to occur to the price level and output at the
end of this process (there is...
Inflation in the country of Hypothetica is currently 5%, above the target range of its central...
Inflation in the country of Hypothetica is currently 5%, above
the target range of its central bank.
What does this tell you regarding Hypothetica’s likely output
gap? Illustrate it using an AS-AD diagram, and briefly explain your
diagram
In this situation, what is the central bank likely to do with
regard to monetary policy? Briefly explain your answer and state
also what is likely to occur to the price level and output at the
end of this process (there is...
Inflation in the country of Hypothetica is currently 5%, ABOVE the target range of its central...
Inflation in the country of Hypothetica is currently 5%, ABOVE
the target range of its central bank
(1) In this situation, what is the central bank likely to do
with regard to monetary policy? Briefly explain your answer and
state also what is likely to occur to the price level and output at
the end of this process (there is no need to draw a diagram, but
you can if you feel it helps you explain your answer)
(2) What...
b. In the country of Hypothetica, we have the following information for the year 2015: *Consumption...
b. In the country of Hypothetica, we have the following
information for the year 2015:
*Consumption totalled $2 billion, but 25% of this total
consisted of goods which were initially sold in 2014.
*A total of $250 million worth of new housing stock was
sold.
*Labour wage income was $150 million. *Businesses invested $100
million dollars in new capital (i.e. machinery) stock.
*Businesses also bought $200 million dollars worth of company
shares on the stock exchange.
*Foreigners with working visas...
the us inflation rate has been below the federal reserves 2 percent inflation target since 2012...
the
us inflation rate has been below the federal reserves 2 percent
inflation target since 2012 meaning inflation has been low for the
past decade. if investors anticpated that inflation were to
increase in the future, what impact do you think would have on the
price of Amazon corporations existing bonds( do you think the price
of bonds would increase, decrease, stay the same)? why?
Suppose that, in country of Wonderland, the inflation is at a relatively high level and its...
Suppose that, in country of Wonderland, the inflation is at a
relatively high level and its
unemployment rate is at a historic low. At the same time, a low
interest rate environment
is spurring businesses to hire more workers and invest in new
facilities.
1) Why might the central bank of Wonderland be worried
about these
developments?
2) Given the circumstances, what would
countercyclical monetary policy seek
to accomplish? Explain at least two mechanisms that the central
bank can use...
Suppose that, in country of Wonderland, the inflation is at a relatively high level and its...
Suppose that, in country of Wonderland, the inflation is at a
relatively high level and its unemployment rate is at a historic
low. At the same time, a low interest rate environment is spurring
businesses to hire more workers and invest in new facilities.
1) Why might the central bank of Wonderland be worried
about these developments?
2) Given the circumstances, what would
countercyclical monetary policy seek to accomplish? Explain at
least two mechanisms that the central bank can use...
Suppose that the Federal Reserve sets its target for the federal funds rate at a range...
Suppose that the Federal Reserve sets its target for the
federal funds rate at a range of 0.25 to 0.50 percent. This means
that the discount rate on primary loans will be set at ____ percent
and the discount rate on secondary loans will be set at ___
percent.
1.00; 1.50
1.00; 0.50
0.50; 1.00
1.25; 1.50
1.50; 1.00
2. Which of the following is an example of an operating target
that can potentially be used by the federal reserve?...
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