Refer to the diagrams. The numbers in parentheses after the AD 1 , AD 2 , and AD 3 labels indicate the levels of investment spending associated with each curve, respectively. All numbers are in billions of dollars. If the interest rate is 6 percent and the goal of the Fed is full-employment output of Q f , it should:
A. increase the interest rate from 6 percent to 8 percent.
B. decrease the interest rate from 6 percent to 4 percent.
C. decrease the interest rate from 6 percent to 2 percent.
D. maintain the interest rate at 6 percent.
D. maintain the interest rate at 6 percent.
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Which of the following is a common mistake consumers commit when they make decisions?
A) They take into account nonmonetary opportunity costs but ignore monetary costs. B) They sometimes value fairness too much. C) They are overly pessimistic about their future behavior. D) They fail to ignore sunk costs.
If the price elasticity of demand coefficient equals 2 then:
a. a 7 percent decrease in the price will result in a 14 percent decrease in the quantity demanded. b. a price decrease will increase total revenue. c. the good has an inelastic demand. d. there is likely few substitutes, a short time period under consideration, or this good accounts for a relatively small percentage of consumers' budgets.
Which of the following is an example of the shoeleather costs of inflation?
a. Tito's Restaurant has to print new menus to update its prices compared to other prices in the economy b. Beto sells stocks and earns a real capital gain of $50, but is taxed for the nominal capital gain of $75 c. During Bolivia's hyperinflation, workers rushed to immediately convert their wages from pesos to black-market dollars d. The after-tax real interest rate is lower when inflation is higher
In order for an individual to be indifferent between holding foreign or domestic bonds,
A) the Marshall-Lerner condition must hold. B) the foreign and domestic interest rates must be equal. C) the expected rate of depreciation of the domestic currency is zero. D) the interest parity condition must hold.