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1983. 14.00 16.00 10.00 12.00 2.00 0.00 4.00 6.00 8.00 1983-01-01 Q2. Monetary Policy 1984-07-01 1986-01-01 1987-07-01 1989-01-01 1990-07-01 1992-01-01 1993-07-01 treasury bill rate 1995-01-01

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1983. 14.00 16.00 10.00 12.00 2.00 0.00 4.00 6.00 8.00 1983-01-01 Q2. Monetary Policy 1984-07-01 1986-01-01 1987-07-01 1989-01-01 1990-07-01 1992-01-01 1993-07-01 treasury bill rate 1995-01-01 1996-07-01 1998-01-01 rates rather than the money supply itself. When the central bank follows an interest-rate-targeting 1983-2016 United Kingdom Unemployment and treasury bill rate 1999-07-01 policy, the financial markets and media typically look to changes in the short-term interest rates rather than changes in money supply to gauge the central bank's intentions. The following figure illustrates a As discussed in Ch. 14, since money demand is unstable, the central bank may prefer to target interest time-series plot of Treasury Bill discount rate and the unemployment rate for the United Kingdom since 2001-01-01 2002-07-01 2004-01-01 Unemployment rate 2005-07-01 2007-01-01 2008-07-01 2010-01-01 2011-07-01 2013-01-01 2014-07-01 2016-01-011983. 10.00 16.00 14.00 12.00 8.00 0.00 6.00 2.00 4.00 1983-01-01 1984-07-01 1986-01-01 1987-07-01 1989-01-01 1990-07-01 1992-01-01 treasury bill rate 1993-07-01 1995-01-01 1996-07-01 1998-01-01 1983-2016 Unemployment and treasury bill rate United Kingdom policy, The financial markets and media typically look to changes in the Short-term interest rates Tate what relationship would you expect to see between these two variables? [1.5 mark] (b) Based on your answer in part (a), does this relationship hold up in the data? [1.5 mark] 1999-07-01 than changes in money supply to gauge the central bank's intentions. The following figure illustrates a time-series plot of Treasury Bill discount rate and the unemployment rate for the United Kingdom since (a) If changes in monetary policy are reflected primarily by changes in the short-term interest rate, 2001-01-01 2002-07-01 2004-01-01 - Unemployment rate 2005-07-01 2007-01-01 2008-07-01 2010-01-01 2011-07-01 2013-01-01 2014-07-01 2016-01-01

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