What are benefits of using rules to conduct monetary policy

Reference no: EM13685277

If the Fed lowers the federal funds rate using an open market sale, what will be the effect on other interest rates? The exchange rate? Money and bank loans? Long-term real interest rate? Expenditure plans? Aggregate demand?

1. What are the benefits of using rules to conduct monetary policy?

2. What limits the Fed's ability to steer the economy to avoid both recession and inflation?

3. Why is there dissimilarity between the short-run and long-run effects from an increase in the quantity of money?

4. Why should the Fed decide to target either the interest rate or the monetary base? Why can't the Fed decide acceptable values for both and then use open market operations to hit both targets?

Reference no: EM13685277

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