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2. (6 points) Monetary policy and nominal interest rate Determine how would short-term nominal interest rate (3-month) and long-term inter- est rate (10-year) change in
2. (6 points) Monetary policy and nominal interest rate Determine how would short-term nominal interest rate (3-month) and long-term inter- est rate (10-year) change in each of the following scenarios. Provide an explanation to your answer. (a) A central bank announces that it will increase the growth rate of quantity of money supplied (expansionary monetary policy) to stimulate the stagnant econ- omy. (Assume that the nominal interest rate is not close to zero.) (b) A central bank announces that its ination target from now on is lowered from 4% to 2%. (c) The Fed chairman Jerome Powell announced that there is a regime shifting in the US monetary policy; the shift puts full employment as its priority instead of price stability
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