macroeconomics

|aecon1.lyryx.com Print Preferences Help Lab 7 (Question 4) Name: Joaquin Guerrero Date: 2021-03-28 Question 4 [6 points] The central bank wants to maintain ination at a xed target and to see the economy operating at potential output. It sets its overnight rate (onr) based on the following rule: onr = 5.5 + 5.4 (11 - Tr") + 0.1 [(Y - Yp)lYp] x 100 a) If the economy is operating at potential output and the ination rate is at the Bank's target, 11*, what is the Bank's onr setting? Note: Keep as much precision as possible during your calculations. Your nal answer should be accurate to at least two decimal places. on '55% b) Suppose a boom in a major trading partner increases demand for domestic exports, increases AD and increases real income Y = Yp = 1,110 to Y = 1,243.2. How would the central bank respond (+ for increase, - for decrease)? Basis point change in cm = 0 c) Alternatively, suppose a rise in labour productivity growth pushed the ination rate down by 0.5 percent. How would the central bank respond (+ for increase, - for decrease)? Basis point change in onr = 0 omciammezo:41232