What actions could the Federal Reserve take to achieve consistent growth in real GDP at 4 percent per year?
A) The Fed could follow contractionary monetary policy that would reduce the federal funds rate to zero so investment will rise consistently.
B) The Fed could maintain a growth rate of the money supply of 4 percent, regardless of whether inflation was rising or falling in the economy.
C) The Fed has no direct control over real GDP in the long run, so there are no actions it could take to achieve that goal.
D) The Fed could increase the growth rate of the money supply by 1% each year until the inflation rate was exactly equal to 4 percent.
C
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If there are no external costs or benefits, no price or quantity regulations, no taxes or subsidies, and the good is not a public good or a common resource, then efficiency is
A) achieved when a monopoly produces the good. B) achieved when the good is produced in a competitive market. C) achieved when the amount of output exceeds the amount produced in a competitive market. D) unrelated to the amount produced in a competitive market.
A graph conveys information about a cause-and-effect relationship.
Answer the following statement true (T) or false (F)
As inflation drives up prices, people attempt to find substitutes and adjust what they buy. The resulting substitution bias problem causes the CPI to
a. overstate the impact of higher prices on consumers. b. consistently underestimate the true inflation rate. c. omit the benefits of product quality improvements. d. have larger fluctuations than other price indexes.
Suppose John and Wayne are the only two demanders of cowboy movies. Each month, John buys six cowboy movies when the price is $10 each, and he buys four cowboy movies when the price is $15 each. Each month, Wayne buys four cowboy movies when the price is $10 each, and he buys two cowboy movies when the price is $15 each. Which of the following points is on the market demand curve?
a. quantity demanded = 2; price = $15 b. quantity demanded = 4; price = $25 c. quantity demanded = 10; price = $10 d. quantity demanded = 16; price = $25