[meteor_slideshow slideshow=”adssa” metadata=”height: 126, width: 630″]
Shortly after his appointment in 2013, the new Governor of the Bank of England Mark Carney implemented a strategy of “forward guidance”. When presenting this strategy he said that the Bank would not consider raising interest rates until the unemployment rate has fallen to 7% or below.
However, that link could be put aside if the inflation rate threatens to rise above 2.5% in the medium term.
Write an essay, not exceeding 1500 words, explaining the macroeconomic rationale for this strategy. Your analysis MUST include use of the closed economy IS-LM model. However, you may in addition use any other macroeconomic models or concepts covered in this course.
Important: You must include at least two line diagrams in your essay, although equations may also be used. If you do not include diagrams in your essay, you will not receive a pass mark.
Writer needs to use the line diagrams in IS-LM model separately or together.
Diagrams from aggregate demand also can be used
[meteor_slideshow slideshow=”best” metadata=”height: 126, width: 630″]