If the inflation rate target is 2%, the current inflation rate is 1%, and the output gap is minus 2%, then according to the Taylor rule, the nominal federal funds rate should be ________ percent
A) zero
B) two
C) four
D) three
E) none of the above
B
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Define the following terms. Give a complete and precise definition in one sentence. a. total utility b. marginal utility c. consumer’s surplus d. “law” of demand
What will be an ideal response?
An expected future increase in the price of gasoline may
A) increase the demand for gasoline now. B) decrease the demand for gasoline now. C) increase the supply of gasoline now. D) make gasoline an inferior good.
The narrower the definition of a product:
A. the larger the number of substitutes and the greater the price elasticity of demand. B. the smaller the number of substitutes and the greater the price elasticity of demand. C. the larger the number of substitutes and the smaller the price elasticity of demand. D. the smaller the number of substitutes and the smaller the price elasticity of demand.
Figure 14.6 represents the market for health insurance. Suppose there are two types of consumers, low-cost consumers with $2,000 average medical expenses per year, and high-cost customers with $4,000 average medical expenses per year. The insurance companies estimate that 40% of its customers are high-cost type. If the insurance companies set the price equal to their average cost per customer, what type of customers will dominate the market?
A. low-cost customers B. high-cost customers C. Both types equally split the market. D. There is not sufficient information.