Expert answer:inflation economics
Expert answer:I will put the reading on the attachment. Please finish reading it, it is about 14 pages. And please write about the third topic from the instruction which is related to the reading I provided. Please read the instruction and writing tips carefully. We don’t need the resources from the google, we just need the citation from the reading. The paper with five pages exclude citation will be great, thank you.
zhutourou1.pdf
20171204210901reading_1.zip
20171204210917reading_2.zip
20171204210918writingtips.pdf
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Economics 450 Fall 2017 Christopher Hanes
Paper assignment
The paper is due December 8th (the last day of classes) by 5 pm. Print the paper out and put it under my door or
in my Economics department mailbox. I will not accept papers after 5 pm. I will not accept papers through
email. Subject: choose one of three topics given below. Length: no shorter than four pages of double-spaced
text, no longer than eight pages, not counting citations, graphs and tables. If you want to use equations or graphs
to make your points, great! You can draw graphs by hand if you want. If you use a hand-drawn graph, draw it
on a separate piece of paper, write e.g. “Figure 1,” at the top of the sheet and refer to it within the paper as
“Figure 1.” Put all graphs together at the end of the paper, after the list of citations. I will take off for errors in
spelling or grammar.
All the material you need to write the paper is in the coursepack readings or in the class notes. I expect you to
use all material from the coursepack that is relevant for the topic you chose. If there is a reading in the
coursepack that makes a point that is obviously relevant to the topic you chose, and you fail to cite that
reading appropriately in your paper, I will lower your grade.
I do not expect you to use or cite any material beyond the readings in the course pack and the class notes. I
cannot forbid you to use Google but I do not want you to. If you use something you read on the internet (or in
print) without properly citing it, that is plagiarism. If you copy a sentence from the internet (or something
printed) without putting it in quotes and properly citing it, that is plagiarism. Remember that I can use Google
too. If I am suspicious about anything in your paper, I will look for it on the internet myself. If I find it you are
dead meat.
When you use something from the class notes, you need not provide any kind of citation. When you use a
reading from the coursepack or something you find for yourself, you must cite it properly. Follow the format for
citations described by the following document from Reed College:
http://academic.reed.edu/economics/parker/Citation%20Guide.pdf
If you fail to follow that format, I will lower your grade. If you have a specific question on how to cite a
specific article in the coursepack, email me.
Look at the document “Writing Rules” posted on my website for this class. Follow those rules.
Here are the possible topics.
I) In July 2014, two members of Congress introduced a bill to change the way the Fed does monetary policy.
Since then many members of Congress have supported the bill or similar proposals. Here is an article from the
Wall Street Journal describing it.
House Republicans Want Fed to Adopt Policy-Making Rules
By Pedro Nicolaci da Costa
Several House Republicans are embracing Stanford University economist John B. Taylor’s call for the Federal
Reserve to adopt a mathematical rule for determining interest rates, stepping into a long-running debate among
central bankers about how to set monetary policy.
The House Financial Services Committee will hold a hearing Thursday…
The hearing will focus on a bill…that would, among other things, require the Fed to provide Congress with “a
clear rule to describe the course of monetary policy,” according to a committee announcement. Such a rule
would be an equation showing how the Fed would adjust interest rates in response to changes in certain
economic variables. One well-known example is the Taylor rule, named for Mr. Taylor…. Mr. Taylor told The
Wall Street Journal last month that under his rule, the Fed should be setting its benchmark short-term rate
above 1%, rather than near zero.
Economists have been debating for years the relative merits of basing interest rate policy on rules vs.
discretion—that is, whether they should adhere to a mathematical formula or maintain some wiggle room based
on circumstances and judgment. Mr. Taylor and some Fed officials are in the first camp, saying rules-based
policymaking creates more predictability and transparency, leading to better economic outcomes. He praised
the legislation on his blog Monday. Others, including Fed Chairwoman Janet Yellen and most top Fed officials,
say they need flexibility to veer from the rules when appropriate….
What do you think? Would a law like this be a good thing? In your paper, make sure to cover the following
points (among others):
1) What is the Taylor rule? How is the Fed’s current monetary policy method similar to and different from the
Taylor rule?
2) What would be the results if the Fed started following a predetermined, hard-and-fast Taylor rule? Would
these results be different from the results of the Fed’s current method? Consider some possible scenarios, and
what outcomes would be in those scenarios if the Fed followed a Taylor rule versus its current method.
II) During the financial crisis the Federal Reserve and Treasury made loans to, and purchased “troubled” assets
from, banks and many other types of financial firms including investment banks and the insurance company
AIG. Many people on both the political left and right have criticized these actions as “bailouts” that helped
politically powerful firms at the expense of the American taxpayer. In May 2015 Senator Elizabeth Warren
(Democrat) and Senator David Vitter (Republican) together introduced a bill to limit the Fed’s ability to engage
in such lending. Former Fed chair Ben Bernanke and current chair Janet Yellen argue that these loans and asset
purchases were in fact consistent with well-established central bank doctrine and that restrictions on the Fed’s
ability to lend to financial firms are potentially disastrous. In his blog, Bernanke wrote: “Their goal, I assume, is
to induce financial firms and market participants to be less reliant on possible government help, for example, by
holding more cash to protect against possible runs and panics. But their approach is roughly equivalent to
shutting down the fire department to encourage fire safety…Rather than eliminating the fire department, it’s
better to toughen the fire code.”
Discuss in this issue. In your discussion, make sure to cover the following points (not necessarily in this order).
1) Describe the actions of the Fed and Treasury during the financial crisis that have been described as
“bailouts.” Were they in fact consistent with well-established central bank doctrine? What doctrine is Bernanke
and Yellen talking about?
2) Why did the Fed provide such aid to financial firms and not to, say, manufacturing firms or families?
3) From the point of view of Bernanke and Yellen, what are the potentially disastrous consequences of limiting
the Fed’s ability to lend to financial firms?
4) What could Bernanke mean by the phrase “toughen the fire code?” To what kind of regulations could he be
referring?
III) Back in 2008, two Federal Reserve economists published an article (in your coursepack) titled “What is the
Optimal Inflation Rate?” In it, they discussed what level the Fed should choose for an inflation target. They said
that a “standard” model suggested a target inflation rate of 0.7-1.4% (in the PCE index) would be good, and that
a target of 2% would also be good; 2% would “place only limited contraints on monetary policy in stabilizing
the economy.” In fact, back in 2008, nearly all economists believed 2% was a good inflation target.
Nowadays, in 2017, many economists argue that the Fed’s inflation target should be higher than 2%. For
example, Olivier Blanchard, formerly the chief economist at the International Monetary Fund, recommends an
inflation target of 4%.
Why are economists recommending an inflation target of 4% now, if they recommended an inflation target of
2% back in 2008? In your paper, make sure to cover all of the reasons economists give for adopting a higher
inflation target.
Writing rules
Number the pages.
The introductory paragraph must state your conclusions, e.g. your answers to the specific
questions I posed with respect to the topic you chose. The concluding paragraph should
restate your conclusions but not in exactly the same words.
You may refer to the Federal Reserve system or the FOMC as the “Fed.” You may not
refer to it as the “FED” (all caps).
When you quote, you must give page number as well as author and year:
“Dogs bite” (Aaron 1996, 12)
Be careful with semicolons. Do not use semicolons at all unless you know what they for.
Know the difference between “its” and “it’s,” between “who’s” and “whose,” between
“effect” and “affect.”
Look up the difference between “compare with” and “compare to.” If you mess this up I
will HATE YOU.
“Relate to,” “correlate with.” NOT “relate with,” “correlate to.”
“Reason for” NOT “reason of.”
“Research on” or “research about.” NOT “research of.”
There is no such word as “researches.”
Avoid the passive voice.
NO
YES
NO
YES
I was bitten by the dog.
The dog bit me.
Models have been designed
Economists have designed models
Avoid unnecessary adjectives and adverbs.
NO
YES
little universal consensus has been achieved
little consensus has been achieved
oh, wait…that’s passive. Better:
economists have not come to a consensus
NO
YES
it is very likely
it is likely
NO of utmost interest
YES of interest
oh, wait…even better:
interesting
Avoid fancy, big, odd words
Always ask: is there a shorter word that means the same thing?
As much as possible, avoid using words you don’t use in ordinary conversation.
…
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