Calculation for Monetary Policy

In the economy of Rulewania, the current inflation rate is 6 percent and the Central Bank's target inflation rate is 2 percent. Real GDP exceeds potential GDP by 1 percent, and the long-term growth rate of real GDP is 5 percent. The medium-term growth rate of the velocity of circulation of the monetary base is 2 percent. According to the Taylor rule, what federal funds rate should the Central Bank set?

#Parkin #11edition #MonetaryPolicy #Chapter31

Monetary Policy

 

In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP?

In the aggregate demand-aggregate supply framework, how does an increase in the price level affect potential GDP? 

#Parkin #11edition #AggregateSupply #AggregateDemand #Chapter27

Aggregate Supply, Aggregate Demand