assign7 - Intro Macro N. Sheflin ASSIGNMENT 7 NOTES: We...

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I n t r o M a c r o N . S h e f l i n ASSIGNMENT 7 NOTES : We introduce the Fed, discuss monetary theory (how money ‘matters’). and short-run monetary policy in the Keynesian model Don’t worry about ( ignore ) any reference to long-run policy issues for now. We’ll come back to this in more depth later in the course. Also, we’ll play a short run monetary policy game– the Chairman’s game Read and start on Investment Game Round 2 Some more advice – Majors etc OFFICE HOURS this week only, changed to WEDS 2/23 1:30-3:30 ONLINE MIDTERM –Week of 3/7 – Must be taken in 1 hour window during the period from Tuesday 3/8 6pm and Thursday 3/10 6pm . COVERS weeks 1-7 in 50 multiple choice questions more or less randomly drawn from hw 1-7. LOTS OF IMPORTANT NOTES AT BOTTOM OF ‘PAGE’ ON MONETARY POLICY READING Samuelson chapter 10 sections A and B (skip C for now). Not responsible for the 45 degree line diagram. Krugman, on the liquidity trap: http://krugman.blogs.nytimes.com/2010/03/17/how-much-of-the-world-is- in-a-liquidity-trap/ Fed Actions in the 2007-2009 Crisis http://www.federalreserve.gov/monetarypolicy/bst_crisisresponse.htm And MAYBE A very good, only somewhat dated introduction to Fed funds targeting “Setting The Interest Rate” http://www.frbsf.org/publications/economics/letter/2002/el2002-30.html (the main change is that the Fed adopted the passive discount rate policy mentioned, and in normal times, it is not set but rather moves with the funds rate; also, the fed is now paying interest on reserves). And more details on the Fed and Monetary Policy at: http://www.frbsf.org/publications/federalreserve/monetary/index.html
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480 MULTIPLE CHOICE QUESTIONS - ihw7 FIND CURRENT ARTICLES ON Fiscal/ Monetary policy, Goals, Tools, Targets of Fed Policy, Fed Funds Market. Monetary policy lags, interest rates, liquidity trap APPLICATIONS 1. Select and explain 4 points/terms made in the latest FOMC statement found through http://www.federalreserve.gov/fomc/default.htm (goals, tools, targets, economic conditions) 2. Play the ‘Chairman’s Game” at: http://www.frbsf.org/education/activities/chairman/ a. click on “learn more” b. look at the videos at “policy in depth” c. look over the “economic dictionary” d. play the game – try to achieve the twin goals of stable prices and maximum employment i. what unemployment and inflation rates did you start with? End with? ii. What effect did raising the fed funds target rate have? Why? How quickly? BIG QUESTIONS 1. How is monetary policy ‘done’? Why did we need it in this recession? 2. How does monetary policy affect the economy in the short-run? 3. What is the Fed, What does it do? How? Why? 4.
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assign7 - Intro Macro N. Sheflin ASSIGNMENT 7 NOTES: We...

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