Suppose there is a report that the unemployment rate unexpectedly increased in the previous month. To what extent will the expected central bank response to this news affect how stock prices will respond to this report of a higher than expected unemployment rate? Explain
What will be an ideal response?
The effect on stock prices will be ambiguous, all else fixed. What the Fed is expected to do in response can change this. If the Fed is expected to act to keep interest rates constant, Y will fall and stock prices will fall. If the Fed is expected to offset any output effects by reducing rates, stock prices will rise.
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According to the partisan theory,
a. politicians are viewed as working only for their own welfare. b. there are two parties with flexible goals. c. moderates and liberals often switch political goals. d. macroeconomic policy is not a key focus of most politicians. e. none of the above.
If a household has $40,000 in taxable income and its tax liability is $4,000, the household's average tax rate is
a. 10 percent. b. 25 percent. c. 40 percent. d. 50 percent
Define the efficient markets hypothesis
Another term for what the text calls the "target rate of unemployment" is:
A. real unemployment. B. nominal unemployment. C. the natural rate of unemployment. D. Keynesian unemployment.