Even though household have wide-ranging preferences, discuss some of the things that all households have in common including their constraints
What will be an ideal response?
All households have limited income and all must pay in some way for the things they consume. They are also constrained by the availability of jobs, current wages, their own abilities, and their accumulated and inherited wealth.
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The Fed loses some control over the interest rate once it targets the money supply,
a. but the interest rate doesn't move in an inappropriate direction with respect to the Fed's monetary policy b. and the interest rate often moves in the opposite of the targeted direction c. but it can still dictate what the interest rate will be d. and loses as well control over open market operations which are linked to the interest rate e. but still maintains indirect control through open market operation
When prices in the goods and services market are below the level anticipated,
a. output will temporarily exceed the economy's long-run potential. b. output will temporarily fall short of the economy's long-run potential. c. output will be equal to the economy's long-run potential. d. the actual rate of unemployment will be less than the natural rate of unemployment.
Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
There is a 10 percent decrease in the price of plastic used by a firm that make more toys. This causes
A. a decrease in the supply of toys. B. an increase of the quantity supplied of toys. C. a decrease in the quantity of toys supplied. D. an increase in the supply of toys.