Consider the Following Monetary Policy Rules for Two Countries,A and B

question 199

Essay

Consider the following monetary policy rules for two countries,A and B:
A: interest rate = 1.8 (inflation - 3)+ 3
B: interest rate = 2 (inflation - 3)+ 4

(A)Graph the policy rules.If the inflation rate is 2 percent in both countries,what is the interest rate in each country?
(B)Which of the two countries has a higher tolerance for inflation? Explain.

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Definitions:

Original Curve

Refers to the initial state or baseline condition of a graphical representation before any changes or impacts are applied.

New Curve

In economic contexts, refers to a shifted demand or supply curve due to changes in factors affecting them, such as consumer preference or production costs.

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Vitamin tablets are supplements containing vitamins that are taken orally to help meet nutritional needs and prevent deficiencies.

Frost

The formation of thin ice crystals on the ground or objects outside when the temperature falls below the freezing point of water.