Assume that the actual inflation rate is 3 percent, the target inflation rate is 3 percent, and that the percentage difference between actual and potential real GDP is 2 percent. According to the Taylor rule, the federal funds rate target should be
A) 3.5 percent.
B) 6.5 percent.
C) 5.5 percent.
D) 5.0 percent.
B
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What is the difference between an "increase in demand" and an "increase in quantity demanded"?
A) An "increase in demand" is represented by a movement along a given demand curve, while an "increase in quantity demanded" is represented by a rightward shift of the demand curve. B) There is no difference between the two terms; they both refer to a movement downward along a given demand curve. C) An "increase in demand" is represented by a rightward shift of the demand curve while an "increase in quantity demanded" is represented by a movement along a given demand curve. D) There is no difference between the two terms; they both refer to a shift of the demand curve.
Without usury laws, banks will
A) charge very high interest rates to all borrowers. B) charge higher interest rates to riskier borrowers than to safer borrowers. C) charge very low interest rates to all borrowers. D) face no demand for loans.
A trade surplus occurs when
A) the value of imports is greater than the value of exports. B) government spending is less than total tax revenue. C) consumption is greater than disposable income. D) none of the above.
When the potential money multiplier is 7, a $3,000 increase in demand deposits could support the creation of ______ new demand deposits
a. $3,000 b. $9,000 c. $15,000 d. $18,000 e. $21,000