Banking and Monetary Policy_Butkiewicz_Date__051310

Banking and Monetary Policy_Butkiewicz_Date__051310 - 3...

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Chapter 15 continued 48: 19 month recession= longest (time wise) since 1929-33 contraction 50: real interest rates= very low- tremendous economic stimulus at times 51: resources and technologies affect ability to produce 52: Fed changes interest rates very gradually (usually ¼ %) - If don’t change rates as much, easier to adjust to equilibrium—slows if less aggressive/gradual change but you avoid mistakes 54: “Beige book”- compilation reports from 12 Fed banks - Try to get National picture of the economy 57: controversial because Fed did this in 1928 then great depression 60: can’t get nominal rate below zero - Drag out recovery process cause need rates to be lower (according to Taylor Rule) Chapter 16
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Unformatted text preview: 3: alpha- how much inflation changes for each 1% point output gap 5: if people believe this (reducing inflation) will work then decrease cost dramatically 6: adaptive expectations- people’s expectations will change only after they see a change 11: if everyone expects higher rate than ideal rate get stuck with high rate as inflation 12: How do you develop credibility that you really do want to control inflation?-Anchor inflationary expectations 13: members of Fed Board appointed for 14 years-Serve complete term and you are done-Serve partial term can be appointed once more for another 14 year term 15: central bank should be independent from political influences...
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