When the Federal Reserve increases interest rates, investment spending ________ and GDP ________
A) decreases; decreases B) increases; decreases
C) decreases; increases D) increases; increases
A
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The short-run tradeoff between the unemployment rate and the inflation rate shown by the Phillips curve is represented in the AS-AD model by
A) rightward shifts of the aggregate supply curve. B) the downward-sloping aggregate demand curve. C) the upward-sloping aggregate supply curve. D) the vertical potential GDP line. E) leftward shifts of the aggregate supply curve.
If the local airport decides to pay monetary compensation to the people on whom the airport's operation has imposed costs, it should compensate the people who
A) currently live nearby. B) currently live nearby and are also tenants. C) currently live nearby and also own the residences in which they live. D) owned nearby residences when the airport was built. E) owned nearby residences when the airport was built and who have not been able to sell their residences since the construction of the airport.
According to the Taylor rule, if the inflation rate in the last year was 2% and output was equal to its full-employment level, the nominal Fed funds rate should be
A) 3%. B) 4%. C) 5%. D) 6%.
Suppose the economy is initially in equilibrium where real GDP equals potential GDP and the inflation rate is at the target rate
Other things equal, a housing boom will cause aggregate expenditures to increase, which will result in a new, short-run equilibrium. To return GDP to its potential level, the inflation rate will adjust. With adaptive expectations, this will result in A) an increase in aggregate demand and an increase in the inflation rate. B) a decrease in aggregate supply and an increase in the inflation rate. C) a decrease in aggregate demand and a decrease in the inflation rate. D) an increase in aggregate supply and a decrease in the inflation rate.