Policy makers:
A. dislike inflation because it redistributes income.
B. dislike inflation because it allows individuals to maintain illusions.
C. like inflation because it allows individuals to maintain illusions.
D. like inflation because it makes society richer.
Answer: C
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Explain who gains and who loses from a tariff and why the losses exceed the gains
What will be an ideal response?
Assume that the Fed has a target inflation rate of 2% and that the values for how much the nominal target federal funds rate responds to a deviation of inflation from its target, g, and how much the nominal target federal funds rate responds to real
GDP, h, are both 0.5. According to the Taylor rule, if inflation increases by 6%, the real interest rate will increase by A) 3%. B) 4%. C) 6%. D) 9%.
A citizen in a developing country with a currency policy of convertibility on the current account could engage in all of the following transactions except:
A. sell foreign currency resulting from the exports of manufactured t-shirts. B. sell foreign currency resulting from the sale of a U.S. treasury bond. C. purchase foreign currency in order to import a BMW. D. purchase foreign currency in order to purchase a U.S. treasury bond.
If the Fed sells $5 million in government bonds, how much will the money supply change?
A. It will increase by $5 million. B. It will increase by more than $5 million. C. It will decrease by $5 million. D. It will decrease by more than $5 million.