According to the Taylor rule, if real GDP is 4 percent below potential GDP, the Fed should:
A. lower the federal funds rate by 2 percentage points.
B. lower the federal funds rate by 4 percentage points.
C. lower the federal funds rate by 8 percentage points.
D. do nothing, as the economy will correct itself.
A. lower the federal funds rate by 2 percentage points.
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The opportunity cost of the financial resources used to finance the purchase of capital is
A) the price of the capital goods purchased. B) the real interest rate. C) the quantity of investment demanded. D) the supply of investment. E) capital investment.
In a(n) __________ insurance policy, the savings component pays a money market rate of interest that changes with market conditions
A) whole B) term C) universal D) variable
A utility-maximizing consumer will
a. consume at a point on her budget line b. consume each good until its marginal utility is zero c. adjust her consumption pattern so that the marginal utilities of all goods are equal d. consume more of a good only if its price rises e. stop consuming any good whose price rises
According to the Keynesian view, if policy makers thought the economy was about to fall into a recession, which of the following would be most appropriate?
a. a change in government spending and taxation that will lead to a budget surplus b. a planned increase in the budget deficit c. reducing government expenditures d. balancing the budget