In response to an unanticipated tightening of monetary policy, the Fed funds rate ________ at first, then ________ after 6 to 12 months.
A. rises; returns most of the way to its original value
B. falls; returns most of the way to its original value
C. remains roughly unchanged; rises significantly
D. remains roughly unchanged; falls significantly
Answer: A
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Refer to Sales Tax. After the tax is imposed, social gain is equal to
The following questions refer to the accompanying diagram which shows the effects of a sales tax imposed on consumers. The initial price and quantity are P0 and Q0, respectively. After the tax is imposed, the equilibrium quantity is Q1, firms receive the price Ps, and consumers pay the price Pd.
a. area A + D + E + G + H + J.
b. area B + C + F + I - J.
c. area A + B + C + D + E + F + G + H + I.
d. area A + B + C + D + F + G + I.
In an economy without government or a foreign sector the equilibrium level of output occurs when
A) actual saving equals actual investment. B) actual saving equals desired investment. C) desired saving equals desired investment. D) desired saving equals actual investment.
When market participants have rational expectations, the deviation of the expected price from the actual future price is
A) zero. B) predictable, provided all relevant information is made use of. C) not predictable. D) predictable under certain circumstances, but not under others.
During the recession of 2008, the U.S.experienced lower real interest rates at the same time investment and GDP were falling
How would a Classical economist explain this recession? Provide a graph of the Classical capital market to illustrate your arguments.