ECON 2035 Chapter Notes - Chapter 15: Blue Book, Federal Open Market Committee, Federal Funds Rate
Document Summary
Have long-term target of what stable prices should be: moderate long-term i-rates: real interest rate measurement (r) Have stable prices and have stability should have moderate interest rate. What should interest rate be: decided by the taylor rule. Financial crisis: major disruption of the financial system, typically involving crashes in asset prices and failures of financial institutions. Stable prices low, positive inflation rate (otherwise decrease decision making: a zero inflation rate inflation has harmful societal effects minimized when 0, a low, stable, positive inflation rate , costs of bringing the inflation rate down to 0 (costs to society is too high because of the reduced output lower employment, risk of falling into a liquidity trap is reduced (most central banks, central bank tactics: Most central banks use short-term interest rate as their policy instrument use interest rate adjustments to attempt to achieve output and inflation stability.
