If the people of Redland are expecting the central bank to conduct an expansionary monetary policy for several years, how will the long-run real interest rate in Redland be affected?
What will be an ideal response?
If the people of Redland expect the central bank to conduct an expansionary policy, inflationary expectations will rise. Since long-term expected real interest rate is long-term nominal interest rate less long-term expected inflation rate, the long-term expected real interest will fall as the long-term expected inflation rate rises.
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Members of the Federal Reserve Board of Governors
A) are confirmed by the House of Representatives. B) frequently need to deal with political pressures. C) are members of the Federal Open Market Committee. D) are appointed to 4 year terms.
Suppose you want to get to Orlando, Florida, for the week-long spring break. You can get there in two and one-half days by bus, and back in another two and one-half days. This will cost you $20 round-trip. You can fly there and back in four hours each way. This will cost $200 . Which of the following is not true?
a. It may be economically rational for you to go by plane rather than by bus. b. Depending on what else you can do that week, it may be economically rational for you to not go at all rather than to go by bus. c. The true cost of going to Orlando is either the time or the money you spend traveling, whichever it is you value more. d. The more you'd enjoy Orlando, the more economically rational it becomes for you to fly there instead of taking the bus. e. It is possible that it is rational for you to fly and rational for others to take the bus.