Assume the economy is initially in equilibrium where potential GDP equals real GDP
If the expected inflation rate, the term structure effect, and the default-risk premium are constant and the Fed wants to lower the inflation rate, the Fed could ________ the target short-term nominal interest rate, which will result in real GDP being ________ potential GDP. A) increase; greater than
B) increase; less than
C) decrease; greater than
D) decrease; less than
B
You might also like to view...
If a consumer receives 20 units of utility from consuming two candy bars, and 25 units of utility from consuming three candy bars, the marginal utility of the third candy bar is
A) 25 utility units. B) 20 utility units. C) 5 utility units. D) unknown as more information is needed to determine the answer.
In peak-load pricing, once capacity is reached, the firm's short-run marginal cost curve becomes ________.
A) negative B) vertical C) horizontal D) upward sloping
A proponent of supply-side economics would advocate
a. reducing income taxes on saving. b. reducing tax credits for research and development. c. eliminating the depreciation allowance. d. increasing the corporate income tax.
Comparative advantage is the rule that ordinarily prevents a nation from independently producing all of the goods it requires
a. True b. False Indicate whether the statement is true or false