What is your response to the following: "The Taylor rule shows a strong correlation between the target rate actually set by the FOMC and the one predicted by the rule. Since the Taylor rule would provide accountability, credibility, and transparency, the FOMC committee should be dissolved and replaced by a form of the Taylor rule."
What will be an ideal response?
While the correlation might be high there are at least two problems with replacing the FOMC with the rule. First, the Taylor rule cannot handle financial panics or sudden threats to financial stability, such as terrorist attacks. The other key problem is monetary policy relies on real-time data, which means data available at the time. Economic data is constantly being revised and the correlation between the target FOMC rates set and the ones predicted by the Taylor rule were observed using economic data that was revised many times. The same correlation may not exist if data available at the time the policy was formulated was used in the rule.
You might also like to view...
The income of consumers increases. and the wage rate in the beef industry increases. As a result
A. the equilibrium quantity sold can either increase or decrease and the price can either increase or decrease, depending on whether the change in demand was greater than the change in supply. B. the equilibrium quantity sold increases and price can either increase or decrease, depending on whether the change in demand is greater than the change in supply. C. the price of beef stays the same and the quantity sold can either increase or decrease, depending on whether the change in demand is greater than the change in supply. D. the price of beef increases and the quantity sold can either increase, decrease or stay the same depending on whether the change in demand was greater than the change in supply.
Which of the following is true about specific performance?
a. It is an amount paid by a breaching party to the suffering party to cover the latter's loss. b. It arises in situations which involve written promises. c. It is usually ordered by the court when the economic value of the transaction is difficult to quantify. d. It is common in case of contracts having a negative influence on the society as a whole.
In the textbook model of endogenous growth, the production function is modeled as
A. Y = AK. B. Y = X. C. Y = S - I. D. Y = C + I + G + NX.
Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. Output Produced in One Day Coolers Radios Jamaica 12 6 Norway 24 3 Refer to Table 3-21. Jamaica’s opportunity cost of one cooler is