{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

Mini-Case 1-Monetary Policy-SP2010

Mini-Case 1-Monetary Policy-SP2010 - a Using the two...

Info icon This 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%.
Image of page 1

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

View Full Document Right Arrow Icon
Image of page 2
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

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern