Money and Banking HW8

According to a 2002 study by Clarida, Galí and Gertler, the Fed followed a weak inflation feedback rule (less than 100% response to inflation) during which of the following periods?

1951-1978

According to a 2002 study by Clarida, Galí and Gertler, the Fed followed a strong inflation feedback rule (more than 100% response to inflation) during which of the following periods?

1979-2000

If the Fed is following the benchmark "Taylor Rule", and inflation is 2% while output is estimated to be 4% below its trend level, the Fed Funds Rate target will be:

2%

If the Fed is following the benchmark "Taylor Rule", and inflation is 2% while output is estimated to be at its trend level, the Fed Funds Rate target will be:

4%

If the Fed is following the benchmark "Taylor Rule", and the equilibrium real interest rate is 4%, what will the equilibrium inflation rate be? (Note that in equilibrium, the output gap is 0)

6%

The banking system (Fed plus banks) can hold the real interest rate below its equilibrium value by creating an

excess supply of money

A permanent increase in the rate of monetary expansion will tend to cause the nominal interest rate to

Decrease in the short run, but increase in the long run

A one-time increase in the money supply will tend to cause the nominal interest

Decrease in the short run, but return to its original value in the long run

A permanent increase in the rate of monetary expansion will tend to cause the real interest rate to

Decrease in the short run, but return to its original value in the long run

A one-time increase in the money supply will tend to cause the real interest rate to

Decrease in the short run, but return to its original value in the long run ALWAYS DECREASE IN THE SHORT RUN, BUT RETURN TO ITS ORIGINAL VALUE IN THE LONG RUN FOR THREE QUESTIONS, EXCEPT FOR ONE

The liquidity effect of an increase in the nominal money supply is the short run

decrease in interest rates required for the public to borrow the new money