Mini-Case 1-Monetary Policy-SP2010

Mini-Case - a Using the two guidelines and the current inflation and real GDP growth rates determine the appropriate Fed Funds Rate b Note that the

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Mini-Case 1 FIN 4324 Spring 2011 You are currently a member of the Federal Open Market Committee. The FOMC utilizes Okun’s Law and the Taylor Rule as two of its key guidelines in helping to establish an appropriate Federal Funds Rate Target. The versions of Okun’s Law and the Taylor Rule currently being utilized by the FOMC are as follows: and The FOMC would like to reduce the unemployment rate by 1.5% over the next year. The current inflation rate is 2.4% and the current rate of growth in real GDP is 2.5%.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
Background image of page 3
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: a. Using the two guidelines and the current inflation and real GDP growth rates, determine the appropriate Fed Funds Rate. b. Note that the parameters on the inflation and output gaps are not equal. What does this specification indicate about the FOMC’s stance on inflation and real economic growth? c. If the current Fed Funds Rate is 3%, explain what the Fed must do with its open market operations to achieve its new Fed Funds Rate Target....
View Full Document

This note was uploaded on 03/16/2011 for the course FIN 4324 taught by Professor Clark during the Spring '11 term at FSU.

Page1 / 3

Mini-Case - a Using the two guidelines and the current inflation and real GDP growth rates determine the appropriate Fed Funds Rate b Note that the

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online