Interest rate stability is a common goal of central banks. When has the Federal Reserve been relatively successful at keeping interest rates stable? Compare quarterly changes since 1965 of the federal funds rate (FRED code: FEDFUNDS) with the level of inflation based on the percentage change from year-ago levels of the consumer price index (FRED code: CPIAUCSL). Are stable interest rates associated with high or low inflation? Why?
Answer to relevant QuestionsTo what extent has the Federal Reserve “monetized” government debt? Plot since 1970 the change from a year ago (measured in billions of dollars) in gross federal debt (FRED code: FYGFD) and the change from a year ago ...Why did the sovereign debt problem of Greece – which accounts for less than 2 percent of euro-area GDP–, threaten the banking system throughout the euro area?If you were asked to design a new central bank, what two institutional design features of (a) the Federal Reserve System and (b) the ECB would you adopt? Explain your choices. The European Central Bank (ECB) has translated its primary objective of price stability into an explicit, quantitative goal of keeping euro-area annual inflation close to, but below, 2 percent over the medium term. Plot the ...Suppose the currency-to-deposit ratio is 0.25, the excess reserve-to-deposit ratio is0.05, and the required reserve ratio is 0.10. Which will have a larger impact on the money multiplier: a rise of 0.05 in the currency ratio ...
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