Change the equilibrium nominal interest rate

Assignment Help Business Economics

Reference no: EM131172382

Discuss how an autonomous increase in the expected rate of inflation will change the equilibrium nominal interest rate. Consider an initial real rate of interest of 2 percent and an expected inflation rate of 2 percent. If the expected rate of inflation falls to 0.0 percent with the real interest rate constant, what would the resulting nominal interest rate become, using the Fisher relationship? The reduction in the expected rate of inflation is considered to remain at the lower level indefinitely. Define your terms and discuss a recommended monetary policy to achieve economic stabilization with price stability and an improvement in the balance of payments.

Reference no: EM131172382

Questions Cloud

Adopt fixed exchange rate system : Imagine that Canada, the United States, and Mexico decide to adopt a fixed exchange rate system. What would be the likely consequences of such a system for (a) international businesses, and (b) the flow of trade and investment among the three countri..

Tax rate consistent with pay-as-you-go system in equilibrium : Currently there are 2.9 workers for every retiree. Average salary is $50,000 and average benefits are $15,000. What is the average tax rate consistent with a pay-as-you-go system in equilibrium? n her novel “Sense and Sensibility”, Jane Austen wrote,..

Explain why social security redistributes wealth : Explain why social security redistributes wealth from the younger generations to the older ones. Explain why, in general, low income individuals benefit more from social security than high income individuals. What is the average tax rate consistent w..

Treasury bonds and the dollar exchange rate with euro : With QEs being conducted by European and Asian central banks, explain what effect a U.S. policy of increasing interest rates will have on prices of U.S. stocks and Treasury bonds and the dollar exchange rate with Euro, yen and yuan?

Change the equilibrium nominal interest rate : Discuss how an autonomous increase in the expected rate of inflation will change the equilibrium nominal interest rate. Consider an initial real rate of interest of 2 percent and an expected inflation rate of 2 percent. what would the resulting nomin..

Why the flexibility of wages and prices tend to favor : Describe one (1) reason why the flexibility of wages and prices tend to favor the Keynesian economic view in the short run and one (1) reason why the flexibility of wages and prices tend to favor the classical economic view in the long run.

Worker with similar levels of education in other? industries : In the United States in? 2011, there were 104 fatalities per? 100,000 workers in the logging industry. This is the? second-highest rate after the fisheries industry. Everything else? equal, would you expect workers in the logging industry to be paid ..

How much is firms total-total variable and total fixed costs : The figure above represents Giuliani’s farm a profit-maximizing perfectly competitive firm with the price of its product been equal to $7. Explain your answers. How much is the firm's total, total variable, and total fixed costs? How much is the firm..

Suppose wages in the market for plumbers increase : Suppose wages in the market for plumbers increase. Some plumbers start taking on extra plumbing jobs while others cut back on the number of hours they work. What could explain? this?

User Account

All Pages