RQch14 - Ch 14 1.6 One of the Feds policy goals is to keep...

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Ch 14 1.6 One of the Fed’s policy goals is to keep the overall price level stable, but this goal does not involve stabilizing prices in individual markets, such as the stock market or the housing market. Changes in conditions in individual markets typically affect the relative prices of goods and services rather than the overall price level. Although fluctuations in asset prices can have an effect on the overall economy, most economists are skeptical that stabilizing asset prices should be one of the Fed’s policy goals. The Fed is better equipped to take actions that will help stabilize the economy as a whole by stabilizing the price level rather than trying to affect conditions in individual asset markets. 2.6 a. In this situation, the interest rate will be equal to the percentage increase from the initial purchase price of the bill to the $1,000 buyers will receive in one year. We can set up the problem like this, where P is the purchase price of the Treasury bill: 2 100 000 , 1 $ = × P
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This note was uploaded on 04/22/2010 for the course ECONOMICS ECON1002 taught by Professor None during the Spring '10 term at Hong Kong Institute of Vocational Education.

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RQch14 - Ch 14 1.6 One of the Feds policy goals is to keep...

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