In the above figure, suppose the economy is at a short-run equilibrium at point B and the interest rate is r2. Which of the following policy options for the Fed will help solve the short-run situation?
A) open market sale of government securities
B) lowering the required reserve ratio
C) lowering the differential between the discount rate and the federal funds rate
D) open market purchase of government securities
A
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Dell Computers allows potential consumers to customize personal computers to their desires. Dell's strategy is successful because offering bundles that more exactly meet a consumer's preference allows Dell to extract more consumer surplus
Indicate whether the statement is true or false
If the discount rate is lowered further below the market interest rate, banks tend to
A) lend more to the Fed. B) lend less to the Fed. C) borrow more from the Fed. D) borrow less from the Fed.
The following is an example of adverse selection
a. A majority of those applying for well paid jobs are well qualified b. More reckless drivers opt for cars with fewer safety devices c. Individuals living in less secure neighborhoods want to buy less insurance d. Individuals with a strong family history of heart diseases opt to buy more insurance
Which of the following is an example of monetary policy?
a. Raising the interest rate b. Decreasing the tax rate c. Increasing the amount of government spending d. Fixing a price ceiling for necessary goods