Refer to the information provided in Figure 6.1 below to answer the question(s) that follow.
Figure 6.1Refer to Figure 6.1. Assume Tom's budget constraint is AC. Given his current monthly income he will not have enough income to purchase the bundle represented by point
A. A.
B. B.
C. E.
D. D.
Answer: D
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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
Which, if any, of the following causes a country's reported GDP to be less than its total economic production?
A) the exclusion of household production B) the exclusion of government transfers C) the inclusion of government expenditures D) None of the above cause reported GDP to be less than total production.
When plotted with the aggregate price level on the vertical axis and output on the horizontal axis, the aggregate demand curve
A) slopes upward. B) slopes downward. C) is vertical. D) is horizontal.
A needed reform in the U.S. income tax system that would reduce the costs of inflation is to
A) go back to taxing nominal wage and salary income. B) start taxing real wage and salary income. C) go back to taxing nominal interest income. D) tax real interest income.