Monetary Econ writing questions

total three parts, each part need to write at least 650 words count, need to answer all questions and make sure meet all grading rubric.

Reading Assignment Guidelines:

Answers should be in complete sentences with proper grammar and punctuation.

Answers should be in your own words, not quotes. If you quote something, you need to identify it as a quote and then explain the quote.

The answers should be complete explanations; none of these should be answered with less than a complete paragraph.

My expectation is that carefully reading these materials and answering these questions should take roughly 4 hours of work.

Readings and Questions:

Part 1: Whelan, Karl. Introducing the IS-MP-PC Model, pages 1-13.

https://www.karlwhelan.com/Macro2/Notes1.pdf

Inflation Dynamics and Monetary Policy, Chair Janet L. Yellen

https://www.federalreserve.gov/newsevents/speech/yellen20150924a.htm (Links to an external site.)

• Define inflation.
• Describe the cost of deviations from stable inflation (inflation that is too high or too low).
• What is core inflation? Why do policy models distinguish between core inflation and overall inflation?
• What determines core inflation? Compare and contrast Yellen’s inflation model (be sure to read the footnotes) with the inflation model used in the Whelan text.
• What is the role of inflation expectations in Yellen’s model?
• Explain the phrase “well anchored inflation expectations” and explain its importance for monetary policy.
• How does Yellen measure inflation expectations? Are expectations currently well anchored? Have then ever been “unanchored.” Explain.
• Does Yellen conclude that the shortfall in inflation is persistent or transitory? Explain how Yellen reaches here conclusion.
• What does Yellen’s inflation model imply for monetary policy (lower or raise interest rates)? Explain.

PART 2: MONETARY POLICY IN A CHANGING ECONOMY, CHAIRMAN JEROME H. POWELL

https://www.federalreserve.gov/newsevents/speech/powell20180824a.htm (Links to an external site.)

• Powell describes what he calls the “conventional view of the macroeconomic structure in terms of three key variables (denoted with “*” s). Explain these three variables.
• Explain how did these “stars” shift during the three historical periods, normalization, the Great Inflation, and the New Economy of the 1990’s.
• If these “stars” are shifting, can they really be considered useful as policy guides? How should policy proceed when we know the “stars” might change? Explain.
• What are the implications of Powell’s analysis for the current situation?

Part 3: The Disconnect between Inflation and Employment in the New Normal, Governor Lael Brainard

https://www.federalreserve.gov/newsevents/speech/brainard20190516a.htm (Links to an external site.)

• Why does Brainard find the current inflation picture puzzling? Compare Brainard’s view of inflation with Yellen’s view from five years earlier? Was Yellen’s view correct? Explain.
• According to Brainard, what are the characteristics of the “new normal”? Explain.
• Explain how the “new normal” benefits workers/households.
• Explain how the “new normal” creates risks for financial stability. Be sure to explain the relationship between inflation, interest rates, and financial stability.
• According to Brainard, what are the implications of her analysis for monetary policy, specifically the goal of get inflation back to trend on a sustained basis? Explain.

Grading Rubric