The main argument against Fed independence is that
A) in a democracy elected officials should make public policy.
B) monetary and fiscal policy would be easier to coordinate if the Fed were not independent.
C) the Fed has proven irresponsible on many occasions.
D) congressional control was tried during the 1960s and it worked well.
A
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Refer to Figure 14-9. Uniguest, Inc is a company that provides PCs with internet access and touch-sensitive screens to hotels
Suppose the Hard Rock Hotel and Casino in Las Vegas informs Uniguest that it is considering installing these systems in its hotel rooms. The Hard Rock expects to be able to charge higher prices for these rooms if it installs Uniguest's systems in its rooms. The two companies begin bargaining over what price the Hard Rock will pay Uniguest for its systems, and the decision tree shown above illustrates this bargaining game. Note that the profit figures listed in the decision tree are additional profits for the Hard Rock and total profits for Uniguest. a. Suppose the Hard Rock offers Uniguest $1,200 per system. Will Uniguest accept or reject this offer? Why? b. Suppose the Hard Rock offers Uniguest $800 per system. Will Uniguest accept or reject this offer? Why? c. Suppose Uniguest attempts to obtain a favorable outcome from the bargaining by telling the Hard Rock it will reject an $800-per-system offer. If the Hard Rock does not believe the threat is credible, what will it do? Why? What will Uniguest do? Why? d. Is there a subgame-perfect equilibrium in this situation? Explain.
Unemployment compensation payments:
a. rise during a recession and thus reduce the severity of the recession. b. rise during a recession and thus increase the severity of the recession. c. rise during inflationary episodes and thus reduce the severity of the inflation. d. fall during a recession and thus increase the severity of the recession.
In the parable of the leaky bucket, a fundamental problem with government redistribution programs is identified. As long as the government only has "leaky buckets" at its disposal,
a. the costs of welfare programs will exceed the benefits. b. it should not try to reach complete equality in income. c. income equality will be the best policy option. d. equality of economic opportunity will reduce society's utility.
If, in response to a decrease in the price of grapes, the quantity of grapes demanded increases, then economists would describe this as
A) an increase in demand. B) an increase in quantity demanded. C) a change in consumer income. D) an increase in consumers' taste for grapes.