Question

post an any article for discussion of macroeconomics

choose article from internet and post question and asked to classmate and then give answer of your question to instruction at the end of discusion

Answer 1

SOLUTION :-

Q.1 : If the only source of “shocks” in the economy is fluctuating autonomous money demand, should the Fed stick to money or interest rate targets to best stabilize GDP?

Answer :- As shown above, under money supply targeting a reduction in autonomous money demand leads to output above full employment, but no additional change due to monetary policy. However, under interest rate targeting, in response to the reduction in autonomous money demand the Fed will reduce the money supply and cause output to return to the original full employment level. If the only shocks are such autonomous money demand changes and the goal is to choose an operating strategy which keeps output nearest full employment, interest rate targeting is best. U