Given the following Taylor rule:Target federal funds rate = natural rate of interest + current inflation + 2x(inflation gap) + x(output gap);What do the coefficients on the inflation and output gaps (2x, x) reveal?
What will be an ideal response?
In this case the coefficient on the inflation gap is twice as large as the coefficient on the output gap so central bankers are more concerned with deviations of inflation from its target than with deviations of output from potential.
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Due to the fact that Curly used his frequent flyer miles to fly to visit Moe, Curly told Moe that it didn't cost him anything to visit. Is Curly correct?
A. Yes, because Curly could stay at Moe's house for free. B. No, because Curly had to pay for earlier trips in order to earn the frequent flyer miles. C. No, because Curly could have used his frequent flyer miles to go somewhere else instead. D. Yes, because Curly's frequent flyer miles made the trip free.
In order to determine a household's budget line, you must know the
A) prices of the goods bought and the household's income. B) prices of the goods bought, but not the household's income. C) household's income, but not the prices of goods bought. D) household's income, prices of the goods bought, and the household's preferences.
If two resources, such as labor and farm machinery, are complementary,
a. one can be used in place of the other b. an increase in the price of one will increase the demand for the other c. an increase in the price of one will increase the supply of the other d. a decrease in the price of one will increase the productivity of the other, which will decrease the demand for that other resource e. a decrease in the price of one will increase the demand for the other
Consider the following three bonds, Bond F, Bond J and Bond P. Bonds F and P mature in 1 year while Bond J matures in 2 years. Bond F and J have a face value of $10,000 while Bond P has a face value of $12,000 . If the interest rate is 15%, rank the three bonds from highest present value to lowest present value
a. Bond F, Bond P, Bond J b. Bond P, Bond F, Bond J c. Bond J, Bond F, Bond P d. Bond P, Bond J, Bond F e. Bond F, Bond J, Bond P