If the Federal Reserve announces that its target for the federal funds rate is falling from 3 percent to 2.25 percent, how do you expect workers and firms to react?
A) As long as the Fed's announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation.
B) As long as the Fed's announcement is credible, workers and firms will decrease their consumption and investment spending, which will decrease aggregate demand and inflation.
C) Workers and firms will incorporate the decrease in interest rates into their expectations of inflation, and they will expect inflation to fall as a result of Fed's policy announcement.
D) If the Fed's announcement is not credible, workers and firms will not expect inflation to rise so they will increase their consumption and investment spending, which will decrease aggregate demand and increase inflation.
A
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In the simple Keynesian model, the aggregate supply curve has a horizontal segment at levels of output below the level of natural Real GDP and a vertical segment at the level of natural Real GDP
Indicate whether the statement is true or false
An advantage of foreign direct investment versus domestic investment for businesses can be to:
A. encourage the flourishment of 'sweatshops.' B. cut costs of production. C. reduce overall risk relative to financial investments available at home. D. increase profit without having to pay taxes on the earnings.
The primary benefits derived from tariffs usually accrue to the:
A. domestic consumers of goods protected by the tariffs. B. foreign producers of goods protected by the tariffs. C. domestic producers of export goods. D. domestic suppliers of goods protected by the tariffs.
Microsoft's argument against the government's antitrust suit included all but which one of the following?
A. It was a natural monopolist. B. It dominated the computer industry because it produced the best products. C. It must behave like a competitive firm because of potential competition. D. The market, rather than the government, could make the best decision for consumers.