The Taylor rule implies that the Fed should set the federal funds target based on which of the following?
A. the proportionate gap between actual real GDP and a measure of potential real GDP
B. the current deviation of the actual inflation rate from the Fed's inflation objective
C. an estimated long-run real interest rate
D. all of these
Answer: D
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Net exports ________
A) are heavily determined by foreign demand for domestic goods B) are heavily determined by domestic demand for domestic goods C) are independent of domestic interest rate fluctuations D) all of the above E) none of the above
In determining whether a market meets the conditions for perfect competition, it is necessary to
A. consider the number of firms in the market. B. determine the appropriate size of the firm. C. assess the production technology available to firms. D. evaluate the promotional tools that can be used by firms.
Tradable emissions permits:
a. provide polluters with an incentive to take the marginal social cost of pollution into account. b. are a form of subsidy. c. give consumers an incentive to buy from environmental-friendly firms. d. are a type of transaction cost.
Refer to the diagram for the federal funds market. If the Fed supplies $300 billion in reserves, the equilibrium federal funds rate is:
A. 6.0 percent.
B. 5.5 percent.
C. 5.0 percent.
D. undeterminable with the information given.