If the Federal Reserve announces that its target for the federal funds rate is rising from 4 percent to 4.25 percent, how do you expect workers and firms to react?
A) If the Fed's announcement is not credible, workers and firms will not expect inflation to fall so they will reduce their consumption and investment spending, which will increase aggregate demand and reduce inflation.
B) As long as the Fed's announcement is credible, workers and firms will reduce their consumption and investment spending, which will reduce aggregate demand and reduce inflation.
C) As long as the Fed's announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation.
D) Workers and firms will incorporate the increase in interest rates into their expectations of inflation, and they will expect inflation to rise as a result of Fed's policy announcement.
B
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An externality is internalized if
A. the person(s) or group that generated the externality incorporate into their own private cost-benefit calculations the external benefits (in the case of a positive externality) or the external costs (in the case of a negative externality) that third parties bear. B. people are made aware of it and realize that social benefits are less than private benefits (in the case of a positive externality) and that social costs are less than private costs (in the case of a negative externality). C. the person(s) or group that generated the externality do not incorporate into their own private cost-benefit calculations the external benefits (in the case of a positive externality) or the external costs (in the case of a negative externality) that third parties bear. D. b and c E. none of the above
Which of the following varies along a given demand curve?
a. consumer preferences b. prices of substitutes c. prices of complements d. the price of the good itself e. income
Community-wide poverty:
A. is nonexistent in the developed world. B. creates problems beyond those faced by poor individuals living in wealthier communities. C. only creates problems in less wealthy countries. D. None of these is true.
Which of the following statements is true? a. A firm that has monopoly power is a price maker
b. A firm that has monopoly power is a price taker. c. A firm that has monopoly power earns exorbitant profits. d. A firm that has monopoly power has a perfectly elastic demand curve. e. A firm that has monopoly power has a perfectly inelastic demand curve.