How might strict adherence to the Taylor rule discourage demand-pull inflation? How might demand-pull inflation occur, nonetheless?
What will be an ideal response?
The Taylor rule requires monetary policy to respond to both inflation and output gaps. If an attempt to lower unemployment results in rising inflation, policy acquires an anti-inflationary bias. Though the Taylor rule can prevent the persistence of demand-pull inflation, it might make brief episodes of inflation more likely. If policy makers underestimate the natural rate of unemployment, adherence to the Taylor rule guarantees that inflation will rise.
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The employment rate is defined as
A) the percentage of the labor force holding employment. B) the percentage of the noninstitutional population either working currently or looking for work. C) the percentage of the noninstitutional population holding employment. D) the percentage of the population currently receiving wages or salaries. E) the percentage of the population currently working and living principally on earnings from labor.
The slope of the consumption function equals the marginal propensity to consume
a. True b. False Indicate whether the statement is true or false
Your boss, the mayor of a city, thought that she'd come up with a great way to raise city revenue: increase the tax on gasoline in the city! However, she discovered that the city was actually receiving less tax revenue after the gas tax increase than before. Incensed, she declared that the economic policy prescription of taxing goods with inelastic demand must be flawed. Comment on her conclusion.
What will be an ideal response?
With regard to the rule of caveat emptor in colonial America, which of the following does not apply?
(a) "Let the buyer beware." (b) This rule largely replaced the earlier rule of markets, market overt, by late colonial times. (c) It could be applied anywhere without the protective regulations of colonial officials. (d) It was meant to cover fraud, and aggrieved buyers could always sue sellers in civil courts for damages.