An upward shift in the Fed's reaction function is equivalent to:
A. an increase in the Fed's long-term target for inflation.
B. an upward shift of short-run aggregate supply.
C. a downward shift of short-run aggregate supply.
D. a decline in the Fed's long-term target for inflation.
Answer: D
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The slope of the consumption function reflects the
a. average propensity to consume b. the ratio of income to consumption c. marginal propensity to consume d. level of autonomous consumption e. level of income
The kinked demand curve is an explanation of sticky prices.
Answer the following statement true (T) or false (F)
Give an example of a scenario that combines positive analysis and normative analysis.
What will be an ideal response?
Figure 14-6
In the situation shown in , how could the Fed return the economy to potential output?
a.
decrease government spending
b.
decrease taxes
c.
sell U.S. government bonds to banks
d.
lower the discount rate
e.
lower the required reserve ratio