Which of the following is true about a liquidity trap situation:
a. Quantitative easing might be a more effective strategy to stimulate the economy than buying short term government securities.
b. Quantitative easing may be able to affect long term interest rates even when the Fed is unable to appreciably lower short term interest rates.
c. The Fed cannot easily reduce the fed funds interest rate.
d. All of the above are true.
Answer: d. All of the above are true.
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The prices of the goods and services in the CPI market basket are collected
A) monthly. B) yearly. C) quarterly. D) infrequently. E) only when the CPI market basket is determined by the Consumer Expenditure Survey.
Refer to Figure 2-2. What is the opportunity cost of one pound of vegetables?
A) pound of meat B) 1.2 pounds of meat C) pounds of meat D) 12 pounds of meat
If the MPC = 0.5 and there is no crowding out, then the spending multiplier is
a. 2 b. 1 c. 4 d. 0.5
Suppose that the total production of an economy consists of 10 oranges and 5 candy bars, each orange sells for $0.20, and each candy bar sells for $1.00. Which expression of the output of this economy is most consistent with the concept of GDP?
A. This economy produces food valued at $1.20. B. This economy produces $7.00 worth of food. C. This economy produces 15 food items. D. This economy produces two-thirds oranges and one-third candy bars.