Banking and Monetary Policy_Butkiewicz_Date__051110

Banking and Monetary Policy_Butkiewicz_Date__051110 -...

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Chapter 15 2: John Taylor- guideline for setting interest rates—Taylor’s rule 3: Know the 4 goals! - If have first goal will have second - If keep inflation low/prices stable will attain all 4 goals 4: Fed changes interest rate to try to obtain these goals 6: keeping inflation at 0 may have benefits 7: 2% (some) inflation—cause temporary recession when decreases to 0% so cost may not be worth benefits 8: many central banks (Not in the U.S.)—explicit - Generally range 1-3%, target 2% 11: fluctuating real inflation—decrease investment and growth - Unstable inflation- misallocation of researches 12: Fed can hit all goals by stabilizing output and inflation 13: big fluctuations in output if Fed didn’t do anything 14: Fed had one policy tool (setting interest rate) and 2 goals (output and inflation) 15: Fed history waits too long to deal with inflation - Concerned with stabilizing output so wait too long to wind don balance sheet 16: unemployment in recession is most costly than unemployment in good times
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Banking and Monetary Policy_Butkiewicz_Date__051110 -...

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