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Subjects -> Economics -> Monetary Theory/Policy -> Posting #25230
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Economics, Monetary Theory/Policy
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Monetary policy and inflation


a. Suppose that the Fed Reserve adopts an inflation targe of 3% for its monetary policy. If the long run growth rate of real GDP(Y) is 2%, then at what rate would the quantity of money (or money supply) have to grow to meet this inflation target?  

b.  In the short run, why might the Federal Reserve miss their inflation target of 3%?

I know that in the long run Money is neutral and that velocity and real GDP Y are constant in the quatity equation MV=PY.  I don't know how can you place the inflation rate to get the rate.  

By OTA:  Jiong Tu, PhD (IP)

OTA Rating:  4.8/5

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