Assume that the federal funds rate is at its target, 2 percent, output is about 1 percent beneath potential, and inflation is roughly 1.5 percent. If the Taylor rule is accurate, the Fed's desired rate of inflation at this time would be:
A. 5 percent.
B. 2.5 percent.
C. 3.5 percent.
D. 1 percent.
Answer: C
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A market is said to "clear" when
A) sellers give up selling their goods because they can't find any buyers. B) buyers and sellers are able to buy and sell as much as they want at the market price. C) the government decides to shut it down. D) sellers run out of goods to sell.
Which of the following would cause prices and real GDP to rise in the short run?
a. an increase in the expected price level b. an increase in the money supply c. a decrease in the capital stock d. an increase in taxes.
If aggregate demand shifts right and the President and Congress want to use fiscal policy to reverse the change in output, they could
a. increase government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will raise output above its long-run level. b. increase government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will reduce output to below its long-run level. c. decrease government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will raise output above its long-run level. d. decrease government expenditures. If by the time policy has been implemented the economy has moved back to long-run equilibrium, then this policy will reduce output to below its long-run level.
A candidate who understands that in a two-person race the person closer to the center of the voter distribution will win is likely to
A) first take polls to figure out what the voters are thinking and then afterward propose policies that are consistent with the polls. B) first put forth his or her views on a whole host of issues and then afterward take polls to see if the majority of voters agree with him. C) speak in specific terms about what needs to be done. D) a and c E) b and c