ACCT M120 -Managerial A+ saplinglearning.com/lbiscms/mod/ibis/view.php?id-372199

Question

ACCT M120 -Managerial A+ saplinglearning.com/lbiscms/mod/ibis/view.php?id-3721991 lege-ECON MO2 -Macroeconomics-Fall17-EDWARDSActivities and Due Dates >Ch. 13 HW 12/3/2017 11:55 PM1/10011/19/2017 08:05 PM Print Caklatr 20 Map dt Sapling Learning The new chairman of the lonian Central Bank (ICB) is preparing for her first board meeting. She is expected to recommend a monetary policy for the board to pursue. She decides to use the Taylor rule developed for the U.S. Federal Reserve. lonia's potential GDP is 100 million drachma, but current GDP is 96 Inflation is running at 2%, but the chairman cosiders an ation rate of 3% to be a a's output gap is reasogaple goal, lonian's Inflation gap is Number Nurmber 96 |% The GDP gap is the between current GDP and potential GDP difference fod funds rate O discount rate should be O inflation rate Number The Taylor rule tells the chairman the target The cument rate is 4% so the chairman recommends | O selling | securities. O buying as Previous ®Give Up & View Solution #Try Again Next Exit about us careers privac

Explanation / Answer

Output Gap =( Potential GDP- Actual GDP / Potential GDP )*100

= (100-96 = $ 4 million/100)*100 =

Inflation gap = 4% ( difference between actual output and potential output)

Federal Funds rate

4%

Buying because if central bank buy securities it will increase money supply.

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