Which policy do you think is better in the short run
Which coverage do you assume is best within the brief run Suppose that the Fed's inflation goal is 2%, potential output development is three.5%, and velocity is a operate of how a lot the rate of interest differs from 5%: %^V= zero.5 X (i-5). Suppose mannequin of the financial system means that the true rate of interest is decided by the equation r= eight.35-%^Y the place Y is the extent of output, so %^Y is the expansion price of output. Suppose that folks count on the Fed to hit its inflation goal. A- Calculate the optimum cash development price wanted for the Fed to hit its inflation goal in the long term. B- Within the brief run, if output development is simply 2% for 2 years and the equation figuring out the true rate of interest modifications to r=four.5-%^Y, what cash development price ought to the Fed purpose for to hit its inflation goal in that interval? C- If the Fed as an alternative maintained the cash development price from half A, what's prone to occur to inflation? D- Which coverage do you assume is best within the brief run? Which is best in the long term?