Is investment sensitive to the real interest rate? Plot since 1990 a measure of the real interest rate based on the difference between Moody’s Baa corporate rate (FRED code: BAA) and a survey of expected inflation (FRED code: MICH) – and (on the right scale) the share of investment (FRED code: GPDIC1) in real GDP (FRED code: GDPC1). Explain the cyclical pattern.
Answer to relevant QuestionsHow sensitive is private investment to risk? Plot since 2004 the share of real gross private domestic investment (FRED code: GPDIC1) in real GDP (FRED code: GDPC1) and (on the right scale) a measure of anticipated stock ...Explain why the rise in oil prices in 2008 created a particularly difficult situation for Federal Reserve policymakers. How would a shock that reduces production costs in the economy (a positive supply shock) affect equilibrium output and inflation in the both short run and the long run? Illustrate your answer using the aggregate ...Explain why monetary policy makers cannot restore the original long-run equilibrium of the economy if, in the short run, the economy has moved to a point where inflation is above target inflation and output is below ...Explain why monetary policymakers’ actions in cutting the Federal Funds rate to almost zero were not sufficient to boost economic activity during the recession of 2007-2009.
Post your question