Question
According to the Taylor rule, for every 1 percentage point that unemployment exceeds the natural rate of unemployment, there is a 2-percentage-point gap between potential
According to the Taylor rule,
for every 1 percentage point that unemployment exceeds the natural rate of unemployment, there is a 2-percentage-point gap between potential and actual GDP.
growth in the money supply should be limited to the long-run average growth rate of real GDP.
if inflation rises by 1 percentage point above its target, then the Fed should raise their targeted interest rate by one-half a percentage point.
the rate of money growth should be set at 4 percent per year.
2.Suppose the government undertakes a large spending program to build community colleges and to make higher education free for many low-income families. How would you expect the program to affect output in the short run? Assuming that the program succeeds in increasing the skills of some workers, how would you expect it to output in the long run?
3.The recent economic recession in 2022 was brought about by the Covid-19 pandemic. The pandemic brought along mitigation efforts such as stay-at home/shelter in place orders, cancelling of large gathering, social distancing, etc,. What impact have these mitiation efforts likely had on the marginal propensity to consume (MPC) and the multiplier in the U.S. economy? What does this imply about the effectiveness and amount offiscal policythat was needed to bring the U.S. economy out of the recession.
4.Suppose you go out shopping for a new espresso machine and run into MLB player Freddie Freeman (who recently signed with the Dodgers--he's really good). You help him find a perfect gift to give his new teammate, Joey Gallo. As thanks for your help, he signed the jersey off his back and gave it to you. Even though his jersey is a valuable asset, why would it not serve as a very good form of money in your attempt to buy an espresso machine?
5.Over the past 12 months, the inflation rate has been 8.5% and the unemployment rate is currently 3.5%. Are the inflation and unemployment rates above or below the Federal Reserve's target? Giventhis, whatmonetary policyactionshould the Federal Reserve take? How would this affect the economy, the inflation rate, and the unemployment rate?
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