You are the chairperson of the Board of Governors of the Federal Reserve. You believe in a Keynesian model of the economy, and your goal is to keep the economy at the full-employment level of output
How would you respond (tightening or easing policy) in each of the following cases? (a) Government purchases increase (b) Corporate tax rates increase (c) Expected inflation increases (d) There's a beneficial oil price shock (and the LM curve shifts more to the right than the FE line)
(a) Tighten
(b) Ease
(c) Tighten
(d) Tighten
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What are some reasons why coordination of economic affairs through the price system may not work perfectly?
What will be an ideal response?
The highest fifth of all families receive approximately ____ of the distribution of annual money income among families
a. 5 percent b. 10 percent c. 25 percent d. 50 percent
If the government decreases the income tax rate, then:
A. GDP will decrease. B. aggregate demand will shift left. C. aggregate demand will shift right. D. aggregate supply curve with shift to the right.
Refer to Scenario 7.1 below to answer the question(s) that follow. SCENARIO 7.1: You are the owner and only employee of a company that writes computer software that is used by gamblers to collect sports data. Last year you earned a total revenue of $90,000. Your costs for equipment, rent, and supplies were $60,000. To start this business you invested an amount of your own capital that could pay you a return of $40,000 a year. Refer to Scenario 7.1. Your economic profit last year was
A. -$40,000. B. -$10,000. C. $10,000. D. $30,000.