If aggregate spending in an economy can be written as Y = 15,000 + 0.6Y - 20,000r, and potential output equals 34,000, what real interest rate must the Federal Reserve set to bring the economy to full employment?
A. 5 percent
B. 7 percent
C. 3 percent
D. 6 percent
Answer: B
You might also like to view...
Refer to the figure above. A change in the budget constraint from B1 to B2 indicates:
A) an increase in the price of sweaters. B) a decrease in the price of sweaters. C) an increase in the consumer's income. D) a decrease in the consumer's income.
For each watch Denmark produces, it gives up the opportunity to make 50 pounds of cheese. Germany can produce one watch for every 100 pounds of cheese it produces. Which of the following is true with regard to opportunity costs in the two countries?
a. The opportunity cost of producing watches is higher in Denmark. b. The opportunity cost of producing cheese is higher in Denmark. c. The opportunity cost of producing cheese is identical in both countries. d. It is impossible to compare opportunity costs because the two countries use different currencies. e. In both countries combined, the opportunity cost of one watch is 150 pounds of cheese.
The economy is in equilibrium, TP = TE, and Real GDP is $4,555 billion. The MPC is 0.80, the multiplier is operative, and idle resources exist at each expenditure round. Government purchases rise by $10 billion. As a result, the __________ curve shifts __________, inventory levels unexpectedly __________, business firms ___________ the quantity of goods and services they produce, and Real GDP
__________ by __________. A) TE; downward; fall; increase; rises; $10 billion. B) TP; rightward; fall; decrease; falls; $50 billion C) TE; upward; fall; increase; rises; $50 billion D) TE; downward; rise; increase; rises, $50 billion
The opportunity cost of holding money
a. the dollar cost necessary to change other assets into money
b. the time cost of accessing funds
c. the value of the goods and services a person is able to obtain with the money
d. the interest a person could have earned by holding other forms of wealth instead
e. zero, because opportunity costs only apply to real assets, goods and services