Suppose that the Federal Reserve Open Market Committee adheres to the ideas expressed by ________. If the economy moves into a recession, the Fed would recommend that the federal funds target rate decrease as long as the inflation rate did not rise above
the publicly announced goal for inflation.
A) the gold standard
B) the monetarist school of thought
C) inflation targeting
D) the Taylor Rule
Answer: C
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Economic theory is sometimes referred to as marginalism or marginal analysis because
A) it deals with matters not central to most people's personal lives. B) it emphasizes the effects of additional benefits and additional costs. C) it has such a minor effect on political decisions. D) it is only useful when it is added to a large stock of other knowledge. E) it was created by abstracting from experience.
If unemployment is below the natural rate, GDP is below potential output
a. True b. False
A tax placed on a good
a. causes the effective price to sellers to increase. b. affects the welfare of buyers of the good but not the welfare of sellers. c. causes the equilibrium quantity of the good to decrease. d. creates a burden that is usually borne entirely by the sellers of the good.
Assume that all commercial banks are loaned up. Total deposits in the banking system are $200 million. The required reserve ratio is increased. The money supply will
A. not change because the required reserve ratio has no impact on money supply. B. not change because there was no change in deposits. C. increase. D. decrease.