Suppose the central bank implements a monetary contraction in the current period and is not expected to continue this policy in the future. Explain what effect this policy will have on the shape of the yield curve and on stock prices
What will be an ideal response?
The current one-year rate will rise with no change in the expected future rate. The two-year rate, given that it is an average of the two one-year rates, will rise. The change in the two-year rate will approximately equal half the change in the one-year rate. The yield curve will shift up and get flatter. What happens to stock prices depends on whether this was fully or partially expected? If fully anticipated, stock prices do not change. If at least partially unexpected, stock prices will fall because of the interest rate effect and the higher output (changes in which were unexpected).
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In 2011, real GDP in the United States was $60 per hour worked. In major European economies, real GDP averaged on $48 per hour worked. This difference is explained by the points that ________ and ________
A) Americans work the same number of hours per week as Europeans on average; Americans are less productive due to technology differences B) Americans are equally as productive as Europeans; Americans work more hours on average C) Americans take more vacations than Europeans; Americans take more sick days than Europeans D) Americans work more hours than Europeans; Americans produce more per hour than Europeans E) Americans work less hours than Europeans; Americans take less sick days than Europeans
Suppose Sam plans to buy only popcorn and soda. He has $40 to spend per week. A change in which of the following variables will change Sam's consumption possibilities? I. price of popcorn II. income III. preferences IV. utility
A) II only B) I and II C) I, II and III D) III and IV
The possible double taxation of income is a disadvantage for
A) sole proprietorships and partnerships. B) partnerships and corporations. C) sole proprietorships and corporations D) corporations.
M1 money includes all but which one of the following?
a. Checkable deposits. b. Savings accounts. c. Paper money. d. Coins.