According to the Taylor rule, if the inflation rate in the last year was 2% and output was equal to its full-employment level, the nominal Fed funds rate should be
A. 3%.
B. 5%.
C. 4%.
D. 6%.
Answer: D
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
Denmark has a comparative advantage in cheese production, and Holland has a comparative advantage in beer production
The two countries initially trade cheese and beer based on their comparative advantages, but the government of Denmark later closes the border to trade with Holland. What is the likely impact of this trade restriction? A) Danish cheese consumers are worse off, and beer producers in Holland are better off. B) Cheese consumers in both countries are worse off. C) Beer consumers in Holland are worse off, and cheese producers in Denmark are better off. D) Beer consumers in Holland are better off, and cheese producers in Holland are better off.
An increase in the price of dairy products produced domestically will be reflected in
a. both the GDP deflator and the consumer price index. b. neither the GDP deflator nor the consumer price index. c. the GDP deflator but not in the consumer price index. d. the consumer price index but not in the GDP deflator.
Refer to the scenario above. If they are the only bidders in the auction, Tom will no longer bid when bidding reaches ________
A) $200 B) $210 C) $350 D) $500