Problem 10 in Chapter 4 asked you to consider the current stance of monetary policy. Here, you are asked to do so again, but with the additional understanding of monetary policy you have gained.

Go to the website of the Federal Reserve Board of Governors (www.federalreserve.gov) and download either the press release you considered in Chapter 4 or the most recent press release of the Federal Open Market Committee (FOMC).

a. What is the stance of monetary policy as described in the press release?

b. Is there evidence that the FOMC considers both inflation and unemployment when setting interest rate policy as would be implied by the Taylor rule?

c. Does the language make specific reference to a target for inflation?

d. Does the language make specific reference to the natural or target real rate of interest?

e. Does the language raise any issues related to macroprudential regulation of financial institutions?

Data From Problem 10 in Chapter 4:-

Suppose that money demand is given by:

\[M^{d}=\$ Y(0.25-i)\]

where \(\$ Y\) is \(\$ 100\).

a. If the Federal Reserve Bank sets an interest rate target of \(5 \%\), what is the money supply the Federal Reserve must create?

b. If the Federal Reserve Bank wants to increase \(i\) from 5\% to \(10 \%\), what is the new level of the money supply the Federal Reserve must set?

c. What is the effect on the Federal Reserve's balance sheet of the increase in the interest rate from \(5 \%\) to \(10 \%\) ?