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Troyanec [42]
3 years ago
15

Suppose that inflation is 2 percent, the federal funds rate is 4 percent, and real GDP is 3 percent below potential GDP. Accordi

ng to the Taylor rule, in what direction and by how much should the Fed change the real federal funds rate?
Business
1 answer:
Alex_Xolod [135]3 years ago
7 0

Answer:

The Fed should decrease the real federal funds rate by 0.5%

Explanation:

The formula according to Taylor can be expressed as;

N=I+R+0.5(I-I*)+0.5(Y-Y*)

where;

N=nominal fed fund rate

I=inflation rate

R=real federal fund rate

I*=target inflation rate

Y-Y*=output gap

In our case;

N=4%=4/100=0.04

I=2%=2/100=0.02

R=unknown=R

I*=assume 2%=2/100=0.02

Y-Y*=-3%=-3/100=-0.03

replacing;

0.04=0.02+R+0.5(0.02-0.02)+0.5(-0.03)

0.04=0.02+R+0-0.015

0.04=R+0.005

R=0.04-0.005=0.035

Change=R-N

Change=0.04-0.035=0.005

The Fed should decrease the real federal funds rate by 0.5%

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Sally’s parents deposited $15,000 into a college savings account on her third birthday. The account had an interest rate of 9.6%
kozerog [31]

Answer:

The correct option is yes,the $15,000 will double each 7.5 years.In 15 years ,it will double twice.

Explanation:

The 72 rule stipulates that the number of years it would take an investment to achieve accumulate a certain amount- future value, can be computed by dividing 72 by the interest rate earns by the investment

N, the number of years=72/9.6

                                      =7.5 years

Invariably,in 7.5 years' when Sally would have been 10.5 years(3 years now+7.5 years) the investment would have doubled.

By another 7.5 years when Sally would have been 18 years(10.5 years +7.5 years), the investment would have doubled twice.

The 72 rule is fast-track approach to calculating the duration of an investment.

7 0
3 years ago
Read 2 more answers
Stephen runs a pet salon. He is currently grooming 130130 dogs per week. If instead of grooming 130130 ​dogs, he grooms 131131 ​
borishaifa [10]

Answer:

Profit will increase by $2.3

Explanation:

Data provided in the question:

If instead of grooming 130130 ​dogs, he grooms 131131 ​dogs

Marginal cost = $65.82

Marginal revenue = $68.12

Now,

The effect on his profits of grooming 131 dogs instead of 130 ​dogs will be:

Change in profit = Marginal revenue - Marginal cost

or

Change in profit = $68.12 - $65.82

or

Change in profit = $2.3

Hence,

Profit will increase by $2.3

7 0
2 years ago
at what point described below will producer surplus most likely drop to zero for a firm? a.) when the firm is taking a significa
kherson [118]

(B) When revenue equals opportunity and variable cost, then the producer surplus most likely drops to zero for a firm.

<h3>What is revenue?</h3>
  • The total income derived from the sale of products or services pertaining to a business's core operations is referred to as revenue.
  • Because it appears at the top of the income statement, revenue, which is also known as gross sales, is frequently referred to as the "top line."
  • A company's overall earnings or profit are referred to as income or net income.
  • Although both revenue and profit are positive indicators for your company, they are not the same thing.
  • The producer surplus for a firm will probably reach zero when revenue equals opportunity costs and variable costs.

Therefore, (B) when revenue equals opportunity and variable cost, then the producer surplus most likely drops to zero for a firm.

Know more about revenue here:

brainly.com/question/16232387

#SPJ4

3 0
9 months ago
Assume that you have a three-year-old daughter and you have come to appreciate the power of saving and investing. Can you open u
aliya0001 [1]

Answer:

No.

You cannot open up and put money into a Roth IRA in your child's name.

Explanation:

The IRS allows that any child, regardless of age, can contribute to an IRA if they have earned income.  This means that only a child that has earned income can have an IRA opened for him or her.  As the child is still underage, the IRA must be set up as a custodial account by the parent or another adult. This implies that the child cannot operate the account during the period she is underage but can have money saved in the account from her earned income.

4 0
2 years ago
Short Company purchased land by paying $10,000 cash on the purchase date and agreeing to pay $10,000 for each of the next ten ye
romanna [79]

Answer:

(D) $71,446

Explanation:

we will calcualte the present value for an 11 payments  annuity-due (there is eleven payment of 10,000 if we count the one at purchase date) which couta is 10,000 discounted at 10%

C \times \frac{1-(1+r)^{-time} }{rate} (1 +r ) = PV\\

C 10,000

time 11

rate 0.1

10000 \times \frac{1-(1+0.1)^{-11} }{0.1} (1 + 0.10) = PV\\

PV $71,445.6711

rounding to the nearest dollars: 71,446

6 0
3 years ago
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