Suppose a contractionary monetary policy raises nominal interest rates. If this is the case, it follows that the contractionary monetary policy must have:
A. reduced expected inflation.
B. increased real interest rates more than it reduced expected inflation.
C. increased expected inflation.
D. increased expected inflation more than it reduced real interest rates.
Answer: B
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Given the information in Scenario 4.3, determine I
A) 0 B) 14 C) 24 D) 36 E) 48
According to the Taylor Rule, if the inflation rate is 3 percent and the GDP gap is 2 percent, what does the federal funds rate target equal?
A) 8.5 percent B) 5.5 percent C) 3.5 percent D) 6.5 percent
The presence of government in the market leads to:
A. benefits at no cost to society. B. rent seeking. C. adverse selection. D. externalities.
If imports are $100 million more than exports, government spending is $500 million, consumer expenditures are $900 million, and investment spending is $600 million, then GDP is
A. $1.9 billion. B. $2.0 billion. C. $1.8 billion. D. $2.1 billion.