Describe, in general terms, the lags in the effects of monetary policy on interest rates, output, and prices. Be sure to note how long it takes each variable to respond to policy changes
What will be an ideal response?
Interest rates respond quickly to changes in monetary policy, reacting within the first month. But the effect is transitory, and after 6 to 12 months, the interest rate has returned most of the way to its original value. Output and prices barely respond to a change in monetary policy at first. Output begins to change after about 4 months, with the full effect being felt about 16 to 20 months after the initial policy change. The price level doesn't change much until about a year after the change in policy.
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For a normal good, the income and substitution effect work in the same direction. For an inferior good, the income and substitution effects work in opposite directions
Does this imply that the demand curve for an inferior good is upward sloping? Explain.
If a plaintiff believes there is a 30 percent chance they will win $200,000, a 40 percent chance they will win 100,000, and a 30 percent chance they will win nothing (zero), and the litigation cost is $50,000, what is the expected value of the litigation for the plaintiff?
A) $50,000 B) $100,000 C) $60,000 D) $125,000
Hank's Honey is a bee farm out in the country. Kid Kare Nursery School is next door. Fleurette's fruit orchard is located on the other side of the school. Hank's bees, searching for nectar, buzz by the nursery school to feed in Fleurette's orchard and in doing so, pollinate the fruit. The school children, however, fear the bees. Who benefits in this story?
a. Hank and Fleurette b. Kid Kare c. Hank only d. Fleurette only e. no one benefits, but Kid Kare loses
A large airline calculates that the additional cost of a having a passenger on a flight to the Bahamas as the cost of a bag of peanuts and a soft drink, which totals $1.50, but the airline's price is $600 for potential customers who want to buy vacant seats on the day of the flight. Which economic principle is this airline failing to utilize?