Reference no: EM131833212
Question: Central bankers often believe that their hands are tied by the public. Arthur Burns, the Fed chairman under President Nixon, reportedly said in the November 1970 Federal Reserve board meeting that "he did not believe the country was willing to accept for any long period an unemployment rate in the area of 6 percent." In other words, if AD shocks or potential growth shocks came along that pushed the unemployment rate up, Burns believed he had to boost AD to help the economy: The voters wouldn't tolerate anything else.
a. In the early 1970s, the economy was hit with some negative potential growth shocks, the most famous of which were the massive oil price increases caused by the OPEC oil embargo. Inflation started off at 4%, and Burns actually behaved according to his stated philosophy. What did Burns do to AD in the 1970s: Did he raise it or lower it?
b. If Burns had kept AD fixed instead of shifting it as he did, would inflation have been lower or higher than it actually turned out to be?
c. According to our model, did Burns' actions raise, lower, or have no impact on the longrun aggregate supply curve?
d. If in the 1970s the United States had been hit by negative AD shocks instead of negative potential growth shocks, and Burns had followed his same philosophy, would inflation have been higher or lower than it actually turned out to be?
|
How fast the money supply should grow
: Practice with the best case: You are the central banker, and you have to decide how fast the money supply should grow. Your economy gets hit by the following.
|
|
In which cases should Federal Reserve change money growth
: Milton Friedman famously said that changes in money growth affect the economy with "long and variable lags." That means that if the government increases growth.
|
|
What was the growth of velocity between the two years
: We explained how a central bank has an important role in maintaining confidence: "High confidence" keeps velocity growth and the money multiplier from falling.
|
|
Summarize literature review
: Research Questions/Hypothesis - Research questions should be linked to Literature Problems, Gaps, and Hypothesis. Need to summarize literature review
|
|
What did Burns do to AD in the given year
: In the early 1970s, the economy was hit with some negative potential growth shocks, the most famous of which were the massive oil price increases caused.
|
|
What is the best policy for keeping AD as stable as possible
: If velocity shocks are common, what's the best policy for keeping AD as stable as possible: fixed money growth, nominal GDP targeting? Or are both equivalent?
|
|
Determining change in monetary policy
: Assume that the central bank can really control money growth and velocity growth within a reasonable period of time. Instead, let's work with the more realistic
|
|
Defining the typical definition of money
: Let's find out what counts as money. In this chapter, we used a typical definition of money: "a widely accepted means of payment."
|
|
Research proposal-The Effect of workforce diversity training
: Based on your literature review, required to write business research proposal Topic is The Effect of workforce diversity training in Australian Fast food
|