Explain the potential downfalls of the Fed implementing an expansionary monetary policy or contractionary monetary policy at the wrong time
What will be an ideal response?
The Fed would implement an expansionary monetary policy when the economy is entering a recession or is already in a recession in order to stimulate the economy and push actual GDP up to its potential. If timing is off and the economy has already started to recover from the recession, the impact of an expansionary monetary policy could actually overstimulate the economy and create inflationary pressure on the economy.
The Fed would implement a contractionary monetary policy when the economy is at or near potential GDP and prices are starting to rise in order to keep inflation in check while keeping GDP at or near its potential level. If timing is off and prices have already started to stabilize, the impact of a contractionary monetary policy could actually slow the economy down and push it towards recession.
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A) oil B) pork C) diamonds D) tigers
Another commonly used algebraic form for a demand function is the semi-logarithmic functional form, log(Q) = a - bP + cI, where Q is quantity demanded, P is the product price, and I is income
Here, -100b represents the percentage change in quantity demanded given a one unit increase in price. By the Law of Demand, we should expect the value of b to be: A) positive. B) negative. C) positive or negative. D) We do not have enough information to answer this question.
Something is called a barrier to entry only if it makes entry into an industry absolutely impossible
a. True b. False
The discount rate is the interest rate charged by:
a. major banks to their best customers. b. banks for overnight loans to other banks. c. the Fed on loans of reserves to banks. d. banks for loans of less than 24 hours.