Using the Taylor rule, if inflation is 3 percent, desired inflation is 2 percent, and output is 2 percentage points above potential, the Fed should target a federal funds rate of:
A. 3.5.
B. 4.5.
C. 6.5.
D. 3.0.
Answer: C
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An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________
A) supply; right; fall B) supply; left; rise C) demand; left; fall D) demand; right; rise
A firm has $300 million in revenues and explicit costs of $100 million. If its owners have invested $150 million in the company at an opportunity cost of 10 percent a year, the firm's accounting profit is: a. $50 million
b. $150 million. c. $185 million. d. $200 million.
The financial and opportunity costs consumers pay when looking for a good or service:
a. supply shock b. shortage c. excess supply d. disequilibrium e. search costs
The consumer optimum is defined as
A. the set of goods and services that maximizes marginal utility for each good. B. the set of goods and services, subject to the limited income of the consumer, that maximizes the total utility of the consumer. C. the set of goods and services such that the marginal utility of each good equals zero. D. the set of goods and services that maximizes the marginal utility of each good consumed.