A marginal rate of substitution formula tells us:
A. the rate at which the consumer is willing to exchange one good for another, given the level of utility.
B. the rate at which the consumer is willing to exchange one good for another, given the amounts consumed.
C. the rate at which the consumer is willing to exchange one good for another, given the consumer's income.
D. the rate at which the consumer is willing to exchange one good for another, given the prices of the goods.
B. the rate at which the consumer is willing to exchange one good for another, given the amounts consumed.
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The Taylor rule says that if inflation rises by 1 percent above its target of 2 percent, then the federal funds rate should be raised by ______ relative to the inflation rate.
a. 4% b. 2% c. 1% d. 0.5%
In 2000 . many economists believed that the most serious macroeconomic problem confronting the U.S. economy was an inflationary gap. Which policies would be effective in dealing with this problem?
a. Increase transfer payments. b. Increase government purchases. c. Decrease personal income taxes. d. Increase personal income taxes.
When the price level falls
a. The interest rate falls because people will want to hold more money and so sell bonds. b. Firms will want to spend more on new business buildings and business equipment and households will want to spend more building new homes. c. Both A and B are correct. d. None of the above are correct.
How can the Fed increase the money supply? How can the Fed decrease the money supply? Be specific.
What will be an ideal response?