Suppose the federal funds rate rises by 0.5 percent. If the Taylor rule is correct, this might be because output is:
A. 0.5 percentage points below potential output.
B. 0.5 percentage points above potential output.
C. 1 percentage point below potential output.
D. 1 percentage point above potential output.
Answer: D
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Autonomous expenditure is the portion of aggregate expenditure that:
A. equals planned spending. B. is independent of income. C. equals aggregate output. D. equals induced expenditure.
Refer to Figure 15-12. If the firm maximizes its profits, the deadweight loss to society due to this monopoly is equal to the area
A) EFG. B) ACE. C) ABEG. D) ABF.
One reason individuals are willing to pay for information in uncertain situations is that information
A) can reduce uncertainty. B) is a way to diversify. C) is a method of insurance. D) is a method of self-insurance. E) always reduces the difference between the probabilities of possible outcomes.
Recessions
a. almost never occur in the American economy. b. follow a regular and predictable cycle. c. are common features of the American economy. d. have been abolished by wise macroeconomic policy.