The new chairman of the Ionian Central Bank (ICB) is preparing for her first board meeting. She is expected to recommend a monetary policy for the board to pursue. She decides to use the Taylor rule, which was originally developed for the U.S. Federal Reserve. Ionia's potential GDP is 100 million drachma, but current GDP is 96 million. What is Ionia's output gap? Ionia's output gap: %
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- The new chairman of the Ionian Central Bank (ICB) is preparing for her first board meeting. She is expected to recommend a monetary policy for the board to pursue. She decides to use the Taylor rule, which was originally developed for the U.S. Federal Reserve. Ionia's potential GDP is 100 million drachma, but current GDP is 94 million94 million . What is Ionia's output gap? Ionia's output gap: % Inflation is running at 5%5% , but the chairman considers an inflation rate of 3% to be a reasonable goal. What is Ionia's inflation gap? Ionia's inflation gap: % The Taylor rule helps the chairman to determine the target discount rate. inflation rate. fed funds rate. Calculate this target rate for Ionia, according to the Taylor rule. target rate: % The current rate is 4%, so the chairman recommends buying securities. selling securities.QUESTION ONE The Central bank of any country is a national bank responsible for the implementation of the monetary and fiscal policy of a country in order to avert or reduce inflation. This means that the bank is a vehicle through which the government accomplishes many of its economic objectives and deliver development to its citizens. Inflation can be too toxic to an economy as it diverts the economic intentions of any government. One of the impact of increased inflation is on an increased unemployment levels (Olivia Beria, 2016).i. Using Philips Curve, illustrate how increased inflations affects unemployment levels. ii. . Real money demand refers to the amount of money people want to hold in real terms, which means adjusted for inflation. It represents the desire for individuals to hold a certain amount of purchasing power in liquid form, in order to facilitate transactionsand make purchases. The real money supply is equal to the nominal amount of M2, divided by the fixed aggregate…The Federal Reserve uses an inflation target of 2-3%; most economists agree that the US natural rate of unemployment is around 4.5%. Imagine that you are a policy analyst observing the government and the Federal Reserve. You determine that inflation is 1% (very low) and unemployment is hovering around 6.5% (quite high.) The Federal Reserve responds by cutting interest rates and beginning to buy government bonds in open-market operations. The government takes the position that the only way out of a recession is to decrease government spending and passes a budget with very little spending (this is called "taking austerity measures"). What effects would the Fed's actions have, if taken alone? What effects would the government's actions have, if taken alone? What do you predict will occur when both actions are taken? Who do you think is making the right suggestion?
- You have been tasked with advising the dictator of a nation over what he should do to increase the countries GDP. He suggests printing money and increasing the growth rate of the money supply. He wants to give this newly printed currency to his soldiers and best political supporters. You know this will not increase GDP in the long run because... I. Money is neutral II. Increasing the growth of the money supply only causes inflation in the long run III. He would only increase GDP in the long run if he distributed the money equally to all citizens IV. He would only increase GDP in the long run only if he printed a large enough sum of money I, II, and III only I, II, III, and IV III only I and II only“The Bank of Zambia’s Monetary Policy Committee has kept the monetary policy rate unchanged for over a year despite inflation being consistently above the 6-8% target range”. DISCUSSMonetary policy: Monetary policy refers to the use of interest rates and other monetary tools by the central bank to influence the economy. In the case of a severe negative supply shock, the central bank may lower interest rates to stimulate borrowing and investment, which can boost demand and offset the reduction in supply. However, this may lead to inflation if the increased demand leads to higher prices, which can further erode the purchasing power of consumers. Explain this graphically please.
- In general, when there is less competition in the banking sector ( a lower supply of firms), nominal interests rates decrease, which makes it easier for business owners to obtain a loan. inflation decreases, which is better for the economy as a whole. nominal interest rates increase, which is good for businesses. nominal interest rates increase, making it more difficult for business owners to obtain loans, which is bad for the economy as a whole.How do you think the GDP, the unemployment rate and the inflation rate are related to each other in the emerging markets? Do you think these relationships are different in the Turkish context? Explain. The interest rates are considerably higher in Turkey. How do you think the high interest rates affect the ĠDP, the unemployment rate and the inflation rate? Actions that can be defined as contrary to publication ethics in the scientific community are defined as follows; - plagiarism, paraphrasing3b. Suppose a country has a money demand function (M/P)d kY, where k is a constant parameter. The money supply grows by 12 percent per year, and real income grows by 4 percent per year. What is the average inflation rate?
- Question 13 (1 point) Suppose the supply of money, measured by M1, is $3.0 trillion, output, measured by real GDP, is $18.7 trillion, and the velocity of money is 7.1. Suppose the supply of money increases to $3.7 trillion but GDP and the velocity of money do not change. What is the percent by which prices change? Provide your answer as a percentage rounded to two decimal places. Do not include any symbols, such as "$," "," "%," or "," in your answer. Your Answer: AnswerThe country of Freeland has an aggregate demand curve determined by the equation M + U = 6% Freeland also has a potential growth rate of 2%. Using this information, draw Freeland's aggregate demand (AD) and long-run aggregate supply (LRAS) curves on the graph. Inflation rate (%) 12 11 10 9 8 7 6 5 4 3 2 1 0 -2 -1 0 LRAS 1 2 3 3 4 5 6 Real GDP growth rate (%) prevailing inflation rate: What is the prevailing inflation rate in Freeland? AD What is the prevailing real GDP growth rate? prevailing real GDP growth rate: 7 8 9 10 % %The Federal Reserve, the central bank of the United States, has an inflation target of 0.3% per month. According to the Quantity Theory of Money, by how much must the Federal Reserve grow the money stock in order to hit its inflation target? The Federal Reserve must decrease the money stock by 0.3% per year. The Federal Reserve must increase the money sock by 0.3% per year. The Federal Reserve must decrease the money stock by 0.3% per month. The Federal Reserve must increase the money stock by 0.3% per month.