question archive If the Fed decides to increase interest rates to fight off potential inflation, and their policy action kept the inflation rate stable, then other things equal, this would result in O A
If the Fed decides to increase interest rates to fight off potential inflation, and their policy action kept the inflation rate stable, then other things equal, this would result in O A
Subject:EconomicsPrice: Bought3
If the Fed decides to increase interest rates to fight off potential inflation, and their policy action kept the inflation rate stable, then other things equal, this would result in O A. the IS curve shifting to the left. B. the IS curve shifting to the right. O C. the MP curve shifting down. OD. the MP curve shifting up. [Related to the Chapter Opener] The chapter opener notes that Senator Richard Shelby of Alabama accused Chairman Bernanke of sitting idly by while financial problems developed, which "greatly exacerbated the crisis." In the early 1960s, Milton Friedman made the same criticism of the Fed's monetary policy during the Great Depression. In light of the problems of lags, forecasting, and economic uncertainty, to what extent do you think it is reasonable to hold the Fed accountable for the policy failures that led to the financial crisis of 2007-2009 and the Great Depression? A. With the various lags inherent in monetary policy and the uncertainty of forecasts and models, the Fed may have been unaware or incompletely aware of the potential problems, and thus should only be held partially accountable for the financial crisis of 2007-2009 and the Great Depression. B. Regardless of the monetary policy limitations, the Fed should have been able to fully anticipate the direction in which the economy was headed, and thus should be held responsible for the financial crisis of 2007-2009 and the Great Depression. Suppose the economy is initially at full employment with real GDP equal to potential GDP, and the expected inflation rate equal to the actual inflation rate. If the economy then experiences a negative demand shock, and the Fed responds to the results of the demand shock with an appropriate monetary policy, this would best be represented by a movement from Real interest rate, B ? MP O A. point C to point A to point B. B. point C to point B to point A. C. point A to point B to point C. OD. point A to point C to point B. C MP 152 15, Y Y = 0 Output CE ???, ? (percent deviation from potential GDP) Assume that the term structure effect and the default - risk premium remain unchanged and that households and firms have adaptive expectations. At the beginning of 2013, a bank is offering car loans at a nominal interest rate of 7% and the expected rate of inflation is 2%, and at the beginning of 2014, the bank decreases the nominal interest rate to 5%. The real interest rate at the beginning of 2014 is ..... A. 2%. O B. 3%. C. 5%. D. This cannot be determined without being given the expected inflation rate for 2012.
