Explain the impact on the monetary policy reaction curve and the nominal interest rate if the level of government purchases were to decrease and the central bank does not change its inflation target?
What will be an ideal response?
The monetary policy reaction curve would shift right. A decrease in government purchases lowers the level of aggregate demand. Without a change in the target inflation rate, this means the central bank has set a lower real interest rate at every level of current inflation. This will also decrease the nominal interest rate since the real interest rate is lower and the target inflation rate has not changed.
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During 1991, Argentina's monetary law had a currency board. Explain and give an example
What will be an ideal response?
The output gap of zero indicates that
A) nominal GDP is equal to Real GDP. B) GDP is equal to GNP. C) the balance between unemployment and inflation has been reached. D) actual real GDP is equal to natural real GDP.
Which one of the following statements about public debt is most accurate? a. Poor people are burdened by the debt because they pay more in taxes than they receive in interest
b. Poor people gain from the debt because they pay less in taxes than they receive in interest. c. Wealthy people are burdened by the debt because they pay more in taxes than they receive in interest. d. Wealthy people gain from the debt because they pay less in taxes than they receive in interest. e. The debt affects the poor and rich people equally.
The marginal cost intersects the average variable cost
A. and the average total cost through their upward-sloping sections. B. in its upward-sloping section and the average total cost through its downward-sloping section. C. through its minimum point and the average total cost through its maximum point. D. and the average total cost through their minimum points.