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Bess [88]
4 years ago
11

Suppose the the equilibrium real federal funds rate is 4 percent and the target rate of inflation of 1 percent. Use the followin

g information and the Taylor rule to calculate the federal funds rate target.
Current inflation rate = 4 percent
Potential real GDP = $14.72 trillion
Real GDP = $14.81 trillion

The federal funds target rate is ___%
Business
1 answer:
nikitadnepr [17]4 years ago
6 0

Answer:

9.81%

Explanation:

Data provided in the question:

Equilibrium real federal funds rate = 4%

The target rate of inflation = 1%

Current inflation rate = 4 percent

Potential real GDP = $14.72 trillion

Real GDP = $14.81 trillion

Now,

Output gap

= [ Real GDP - Potential GDP ] ÷ Potential GDP

= ( $14.81 - $14.72 ) ÷ $14.72

= 0.09 ÷ 14.72

= 0.0061 or 0.61%

Target Federal Funds Rate

= Current Inflation rate + Equilibrium real FFR + 0.5 × (Current inflation rate - Target inflation rate) + 0.5 × Output gap

= 4% + 4% + [ 0.5 × (4% - 1%) ] + [ 0.5 x 0.61% ]

= 8% + [ 0.5 × 3% ] + 0.31%

= 8.31% + 1.5%

= 9.81%

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The accounting for defined contribution pension plans is easy because each year:a. The employer records pension expense equal to
Anna71 [15]

Answer:

A) The employer records pension expense equal to the annual contribution.

Explanation:

Defined contribution (DC) pension plans are retirement plans that allow both the employer and employees make contributions and invest the those funds to try to earn more money for the moment they retire. So the future benefits will change depending on the performance of the invested funds.

3 0
3 years ago
Jacob is looking to buy some car insurance and is reviewing different policies from several different agencies. The first policy
Lostsunrise [7]

The expected value of buying this insurance policy is $50.

The expected value of buying the insurance policy is the weighted average of probabilities of the cost of the insurance and the cover if Jacob gets into an accident.

If Jacob gets into an accident and is covered, his payout will be:

= benefit - cost

= 10,000 - 750

= $9,250

The probability of this happening is 8%.

If Jacob does not get into an accident he would lose the $750 he paid in insurance premiums. The probability of this happening is:

= 100% - 8%

= 92%

The expected value of the insurance is:

= (probability of accident * payout if there is an accident) + (probability of no accident * payout if there is no accident)

= (8% * 9,250) + (92% * -750)

= $50

<em>More information on expected value can be found at brainly.com/question/17069001.</em>

5 0
3 years ago
Classroom management is largely unaffected by the characteristics of the students making up the class.A. TrueB. False
ivanzaharov [21]

Answer:

B: False

Explanation:

Classroom is the place where different types of students come together and get education together. Each and every student is different in him or herself. When it comes to the management of classroom, definitely, its environment is defined and made by its students. It is seen that there are some classrooms which are easy to handle, manage and look after, moreover, they are very interactive as well. Logic and reason behind them is the type of students they are made up of. Students, surely defined the culture of that class, which could be very decent culture, making very less noise, obedient culture etc. Therefore, Classroom management is largely unaffected by the characteristics of the students making up the class is a False Statement.

3 0
4 years ago
Decision makers and analysts look deeply into profitability ratios to identify trends in a company’s profitability. Profitabilit
ahrayia [7]

Answer:

  • If a company has a profit margin of 10%, it means that the company earned a net income of $0.10 for each dollar of sales.  A 10% PROFIT MARGIN MEANS THAT THE COMPANY EARNED 10 CENTS FOR EVERY DOLLAR OF REVENUE.
  • If a company's operating margin increases but its profit margin decreases, it could mean that the company paid more in interest or taxes.  OPERATING PROFIT = GROSS PROFIT - FIXED COSTS, NET PROFIT = OPERATING PROFIT - (INTERESTS AND TAXES). IF TAXES OR INTERESTS INCREASE, NET PROFITS DECREASE

Explanation:

there are several profitability ratios, the most important ones are:

  1. profit margin = net profit / total revenue
  2. gross profit margin = gross profit / total revenue
  3. return on equity = net income / total shareholder equity
  4. return on assets = net income / total assets

4 0
4 years ago
What is the difference between inflation and deflation?
Lorico [155]
I don't know maybe c
6 0
4 years ago
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