In the short run, how does the Fed change the nominal interest rate?
What will be an ideal response?
The Fed changes the nominal interest rate by changing the quantity of money. If the Fed increases the quantity of money, the supply of money curve shifts rightward and the equilibrium nominal interest rate falls. If the Fed decreases the quantity of money, the supply of money curve shifts leftward and the equilibrium nominal interest rate rises.
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Cyclical unemployment ________
A) decreases during an expansion B) grows at the same rate as potential GDP C) is zero at a business-cycle trough D) decreases during a recession
Since 1972, the world price of oil has been largely determined by OPEC, which controls about 75 percent of the world's proven oil reserves. Since 1972 the price of oil has
A) fluctuated. OPEC's situation is an example of a prisoner's dilemma. B) risen slowly, but steadily. Members of OPEC fear that if they raise the price of oil too quickly this will lead oil-buying nations to accuse OPEC of price gouging, which is illegal under international law. C) been tied by OPEC to the rate of inflation in the United States. If, for example, the rate of inflation is 5 percent in one year, OPEC will raise the price of oil by 5 percent the next year. D) steadily fallen through the 1970s, then risen continually in the years since then. OPEC's actions are an example of implicit collusion.
Suppose cars are taxed according to the amount of pollution they emit per gallon of gasoline consumed. We would expect to observe all of the following EXCEPT
A) an increase in quantity demanded of less-polluting automobiles and a reduction in quantity demanded of more-polluting automobiles. B) an increase in quantity demanded of more fuel-efficient cars. C) an increase in production of automobiles that were less polluting. D) an increase in the miles driven.
When the Census Bureau counts the number of poor Americans, it counts
A. Only money income. B. Personal income plus transfer payments. C. Only in-kind income. D. Both in-kind and money income.