Determining the real interest rate

Assignment Help Business Management
Reference no: EM131098523

Suppose that the Fed's inflation target is 2%, potential output growth is 3.5%, and velocity is a function of how much the interest rate differs from 5%: %^V= 0.5 X (i-5). Suppose that a model of the economy suggests that the real interest rate is determined by the equation r= 8.35-%^Y where Y is the level of output, so %^Y is the growth rate of output. Suppose that people expect the Fed to hit its inflation target. In the short run, if output growth is just 2 percent for two years and the equation determining the real interest rate changes to r=4.5-%^Y, what money growth rate should the Fed aim for to hit its inflation target in that period?

Reference no: EM131098523

Questions Cloud

Conservative and radical reviews of labor unions : What are the liberal, conservative and radical reviews of labor unions? What does each group believe is the future of unions? With which group do you agree and why?
Compared to average-imagine worker one is very productive : You are the manager of a firm which sells its output at a price of $40 per unit. You are interested in hiring a new worker who you expect will increase your firm’s output by 2,000 units per year. What is the most you should be willing to pay this wor..
What major issues in these areas for your school community : What connections have you made between the course topics/content and your growing understanding of your school community? Do you see any concepts materialize within your school community?
What is the value of their producer surplus : what is the value of their producer surplus if each mows a lawn and the price for lawn mowing is $107
Determining the real interest rate : Suppose that people expect the Fed to hit its inflation target. In the short run, if output growth is just 2 percent for two years and the equation determining the real interest rate changes to r=4.5-%^Y, what money growth rate should the Fed aim ..
Industry achieves long-run competitive equilibrium : A long-run competitive equilibrium can only be achieved in constant-cost industries. When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. A long-run competitive equilibrium outcome is not econom..
Suppose firm has a short-run cost equation : Suppose a firm has a short-run cost equation of C(q) = 0.3q3 – 15q2 + 200q + 100, and short-run marginal cost equation of MC(q) = 0.9q2 – 30q + 200, if the firm produces 25 units of output:
A simple flowchart based on the simple source : Using a simple flowchart based on the simple Source->Make->Deliver (based on the SCOR Model of the Supply Chain Council), show and briefly explain the main operations and supply chain that you work at your company.
Exchange rate makes uk exports : An appreciation in the exchange rate makes UK exports less competitive overseas. How to draw a diagram using Keynesian AD / AS diagram.

Reviews

Write a Review

Business Management Questions & Answers

  Elimination of pre-existing conditions

1. Can you identify 10-12 scholarly resources for the following topic: How Did the Elimination of Pre-existing Conditions as Criteria for Non-coverage Effect the Public? Provide a rationale for using each resource, including why it is relevant and..

  Show analysis for kenneth dailey of fmc green river

Analysis for Kenneth Dailey of FMC Green River and Aberdeen by focusing on employee motivation. Areas of interest

  Analyze major technological innovations

Analyze major technological innovations

  Weight of detergent in packets filled

An inspector wants to estimate the weight of detergent in packets filled, by an automatic filling machine. She wants to be 95% confident that her estimate is not away from the true mean weight of detergent by more than 10 gms.

  Family and medical leave act in an industrial workplace

What employers are and are not covered by the FMLA what employees are exempt from coverage, how does FMLA relate to a manager's duties, e.g., scheduling

  Traditional to integrative bargaining

Why is it difficult for labor negotiators to switch from traditional to integrative bargaining?

  Human resources questions confirmationan advantage of

human resources questions confirmationan advantage of quantitative job analyses such as the position analysis

  Independent contractors or contingent employees

Show the advantages and disadvantages of independent contractors and contingent employees and describe the impact on operations, particularly production and efficiency.

  Explain how much cash does a company have

Explain How much cash does a company have if the firm has a current ratio of 2.5, a quick ratio of 1.2, and current liabilities of $12,000?

  How would you ensure employee readiness to learn

Mathis explains an employee's readiness to learn in three separate steps -Learners must possess basic skills in order to complete training successfully

  Meeting of equity shareholders

Equity Company and Faye enter into a contract for Faye to cater a meeting of Equity's shareholders. When Faye's schedule conflicts, she asks Gudren to serve Faye's coffee and pastries at the meeting. This transfer of duties is

  Explain hofstedes five cultural dimensions

Explain Hofstedes Five Cultural Dimensions of a specific culture - Identify at least one continuum of each dimension and describe the degree of influence that they have on cultural process.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd