Would the Federal Reserve respond more aggressively with interest rate cuts in a recession caused by a decrease in spending, as in the 2001 recession, than in a recession caused by an increase in oil prices, as in the 1974-75 recession?
What will be an ideal response?
The inflation rate responds differently in the two recessions. A large increase in oil prices decreases real GDP, but increases inflation. The large decrease in spending decreases real GDP and decreases inflation. The Fed wants to increase real GDP, but they also want to prevent an increase in inflation. Cutting interest rates increases aggregate demand which increases real GDP and increases inflation. With a recession caused by a drop in spending, the rate of inflation declines, which allows the Fed to more aggressively cut interest rates.
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Economic theory suggests that the consumer prejudice explanation for discrimination means that consumers will have to pay more to be served by employees of a specific group
a. True b. False Indicate whether the statement is true or false
Is there a tradeoff between fiscal policy that is timely and fiscal policy that is targeted?
A. No, the video gives several examples of timely fiscal policy that was targeted. B. Yes, because it takes a very long time to decide what the targets should be. C. Yes, because the industries that need help also move the slowest. D. Yes, because it's hard to create targeted fiscal policy quickly.
If Karen gets up early and studies three hours for her test, she is likely to get an A. If she sleeps in, she will probably get a C. What is the opportunity cost of sleeping in?
(A) Three additional hours of study. (B) a C. (C) An A. (D) Three additional hours of sleep.
Assume that Tonya consumes only two products, pizza and potato chips, out of a given budget. Both are normal goods for Tonya. If the price of pizza decreases, then Tonya's consumption of pizza will:
A. Decrease due to the income effect B. Decrease due to the substitution effect C. Increase due to the income effect D. Increase due to the law of diminishing marginal utility