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1 page/≈275 words
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APA
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Accounting, Finance, SPSS
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Coursework
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English (U.S.)
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Topic:

Improving Monetary Policies: Explain Your Rationale (Coursework Sample)

Instructions:

"Policy Improvements" Please respond to the following:
Discuss ways the Fed’s objective function can be used with an economic model to evaluate alternative monetary policies. Provide specific examples to support your response.
Discuss ways that economists could use the Phillip’s curve to create better economic policy than we currently have. Explain your rationale.

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Content:

Improving Monetary Policies
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There are two models that can be used in policy processing, structural and forecasting model. Structural model tries to forecast variables such as real GDP, employment and prices. Older structural models usually assume that the future is a function of the past (Taylor, Wieland, & National Bureau of Economic Research, 2009). However, the new ones assume that the consumers and producers in an economy are rational decision makers. On the other hand, forecasting models forecasts the future development. Such a model relies on predetermined statistical correlations of the past and current observations of different variables in the economy (Taylor, Wieland, & National Bureau of Economic Research, 2009). The first thing is too present a guess of the direction in which the economy will take over the next few years. Baseline projections are made about the way the economy is expected to behave. For example, a forecast is made on how inflation and economic growth will respond to a change in equity prices, federal funds rates and major tax legislation.
Philips curve suggest that changes in unemployment level has a predictable and direct effect on price inflation levels (Forder, 2014). Therefore, little unemployment means less inflation. Policy makers can determine the inflation rate they want to achieve and then contract or expand the contract with the aim of getting the targeted rate. This means that one is able to achieve a certain inflation rates for certain level of unemployment (Forder, 2014). For example, if the economy starts at a certain point with inflation at zero and unemployment at 10 percent, the government can expand the economy t...
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