According to the Taylor rule, if inflation equals 3 percent and there is an expansionary gap equal to 3 percent of potential output, the Fed will set a real interest rate of ________ percent and a nominal interest rate of ________ percent.
A. 4; 6
B. 1; 3
C. 1; 4
D. 4; 7
Answer: D
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The above figure shows the U.S. market for chocolate. With no international trade, producer surplus is equal to
A) area A + area B + area C + area D. B) area B + area C + area D + area E. C) area B + area C + area D. D) area C + area D. E) area E.
In a monopolistically competitive market, a successful new restaurant
A) can earn economic profits in the long run if it uses barriers to restrict entry by new restaurants. B) must obtain a trademark to ensure that it will break even in the long run. C) will face high entry barriers because of health and safety regulations to which all restaurants are subject. D) will earn zero economic profit in the long run because of free entry, but competition will lead restaurants to offer different versions of the same product.
The long-run aggregate supply curve represents:
A. potential output in the economy. B. the level of output possible if the economy is operating at full capacity. C. a production function for the entire economy. D. All of these are true.
The manager of Greene Enterprises, Inc., recently estimated its average variable cost (AVC) function to beAVC = 88 - 0.026Q + 0.000003Q2Greene Enterprises faces total fixed costs (TFC) of $300,000. When Greene's output is 2,000 units, what is average variable cost (AVC)?
A. $20 B. $85 C. $72 D. $62 E. $48