When the economy is in recession, does the Fed want to raise the federal funds rate so as to increase aggregate demand and increase real GDP? Explain your answer
What will be an ideal response?
When the economy is in a recession, the Fed surely wants to increase aggregate demand and hence GDP, but raising the federal funds rate is the wrong policy. A boost in the federal funds rate decreases consumption expenditure, investment, and net exports and therefore decreases aggregate demand. The proper policy for the Fed to pursue is a cut in the federal funds rate.
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Discuss why a budget deficit results in a different real interest rate under the Ricardo-Barro effect than under the crowding-out effect
What will be an ideal response?
A preliminary conclusion about welfare reform is that
a. work requirements do seem to yield substantial declines in welfare caseloads b. work requirements cause welfare caseloads to increase c. such reform can only be instituted when the economy is strong d. welfare can be reformed even when the economy is weak e. welfare rolls decline faster when the economy is weak because more people need income during those times
Advocates of comparable worth favor eliminating all differences in wage rates among employees of the same firm
a. True b. False
What adjusts to restore general equilibrium after a shock to the economy?
A. The FE line B. The IS curve C. The labor supply curve D. The LM curve