Present two arguments as to why the Fed should adopt inflation targeting as a framework for monetary policy
What will be an ideal response?
Any two of the following four reasons are correct. First, an explicit inflation target will draw the public's attention to the fact that the Fed can only have an impact on inflation and not real GDP in the long run. Second, the public announcement of the target makes it easier for households and firms to form accurate expectations about future inflation. This will increase efficiency in the economy. Third, an announced target would institutionalize good monetary policy and prevent abrupt changes in policy as members of the FOMC changed. Fourth, an inflation target would promote accountability by the Fed. The target would offer a yardstick to measure the performance of the Fed.
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If the case study on U.S. / China trade is correct in its analysis of factor abundance,
A) Chinese capital owners should see their income rise as trade increases. B) U.S. skilled labor inputs should see their incomes fall as trade increases. C) U.S. capital owners should see their income fall as trade increases. D) Chinese unskilled labor should see their income rise as trade increases.
In the strategic view of bargaining:
a. Bargaining is described by standard game theory rules b. The game is played without specific strategies c. The game always results in a fifty-fifty split d. The game is played just for the fun of it
In general, as units of resource inputs rise, the marginal revenue product
A. rises faster under imperfect competition than under perfect competition. B. rises faster under perfect competition than under imperfect competition. C. falls faster under perfect competition than under imperfect competition. D. falls faster under imperfect competition than under perfect competition.
Which one of the following statements is TRUE?
A. The actual behavior of prices and real GDP during the decade of the 1930s is consistent with a vertical short-run aggregate supply curve. B. The actual behavior of prices and real GDP during the decade of the 1930s is consistent with the classical model. C. The actual behavior of prices and real GDP during the decade of the 1930s is consistent with the Keynesian model. D. The actual behavior of prices and real GDP during the decade of the 1930s is consistent with the idea that increases in aggregate demand will increase the price level but will leave real GDP unchanged.