Describe the Taylor rule. If the Fed were following the rule, what would the nominal Fed funds rate be if inflation over the past year were 4% and output were 1% below its full-employment level?
What will be an ideal response?
The Taylor rule is a rule for monetary policy that allows the Fed to respond to the state of the economy. The rule sets the nominal Fed funds rate as the sum of the inflation rate over the past year plus 2% plus one half times the percentage deviation of output from its full-employment level plus one half times the amount by which inflation over the past year exceeds 2%. If inflation were 4% and output were 1% below its full-employment level, the nominal Fed funds rate would be 0.04 + 0.02 + (0.5 × -0.01 ) + [0.5 × (0.04 - 0.02)] = 0.065 = 6.5%.
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Advocates of floating rates pointed out that
A) removal of the obligation to peg currency values would restore monetary control to central banks. B) imposing of the obligation to peg currency values would restore monetary control to central banks. C) removing of the obligation to peg currency values would restore fiscal control. D) imposing of the obligation to peg currency values would restore fiscal control. E) imposing of the obligation to peg currency would restore monetary control to the consumer.
It is often stated that the Japanese firms develop and adapt new technology to manufacturing process twice as fast as U.S. firms. If this is true, ceteris paribus, we would conclude that the
A) depreciation rate of capital does not change, but the user cost of capital increases. B) depreciation rate of capital increases, but the user cost of capital decreases. C) depreciation rate of capital increases, and the user cost of capital increases. D) U.S. interest rate is too high, preventing American manufacturers from adopting new technologies.
Which of the following is a nonrenewable source of energy?
a. Corn b. Ethanol c. Petroleum d. Bagasse e. Biomass
US recession lasting from December 2007-June 2009
What will be an ideal response?