What actions should the Fed take if it believes the economy is about to experience a high rate of inflation?
What will be an ideal response?
If the Fed believes the economy is about to experience a high rate of inflation, it should conduct contractionary monetary policy, decreasing the money supply and raising interest rates. In implementing contractionary monetary policy, the Fed could raise the discount rate, raise the reserve requirement, and/or have the trading desk sell U.S. Treasury securities.
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If indifference curves and budget lines are used to analyze consumer choice, an inferior good will
A. escape detection when income rises. B. be easily identified because the quantity purchased will fall as income rises. C. be easily identified because the quantity purchased will rise as income rises. D. be easily identified because it will change the slope of the budget line. E. escape detection because this model does not show that relationship.
The original maturity on U.S. Treasury bills is between
A) three months and six months. B) one and ten years. C) six months and three years. D) ten and thirty years.
When a group of nations adhere to a strict fixed exchange rate system, then
a. no country will experience inflation or recession. b. each nation loses some control of its monetary policy and its domestic economy. c. each nation is able to exercise more control of its fiscal policy and aggregate demand. d. each nation is able to exercise more control of its monetary policy and its domestic economy.
Exhibit 11-4 Taxable Income Taxes $0 - $23,000 15% of taxable income $23,001 - $42,000 $3,450 + 20% of everything over $23,000 $42,001 - $100,000 $7,250 + 25% of everything over $42,000 Greater than $100,000 $21,750 + 30% of everything over $100,000 Refer to Exhibit 11-4. If a person's taxable income is $20,000, how much does he pay in taxes?
A) $600 B) $30,000 C) $18,000 D) $3,000