Answer the following statements true (T) or false (F)
1) The Federal Reserve adheres strictly to the Taylor rule when formulating monetary policy.
2) According to the Taylor rule, if real GDP falls by 1 percent below potential GDP, the Fed
should lower the federal funds rate by one-half a percentage point.
3) A liquidity trap occurs when the Federal Reserve reduces reserves in the system, choking off
aggregate demand.
4) (Consider This) In March 2010, total bank reserves held at the Fed exceeded total checkable
deposits held by the banks.
1) F
2) T
3) F
4) T
You might also like to view...
Wealth increases as a result of ________ and/or ________.
A. positive saving; crowding out B. positive saving; capital gains C. positive saving; capital losses D. negative saving (borrowing); capital gains
Answer the following question with a starting point of simultaneous long run and short run macroeconomic equilibrium, with the overall production level in the economy at the natural rate level of real GDP (YNR). This equilibrium may be illustrated in a diagram with the average price level (P) measured on the vertical axis, and real GDP (Y) measured on the horizontal axis. The long run equilibrium is represented by the intersection of the vertical long run aggregrate supply function (LRAS), and the downward sloping aggregate demand function (AD). The short run equilibrium is represented by the intersection of the upward sloping short run aggregate supply function (SRAS), and the downward sloping aggregate demand function (AD). (See the diagram on the left panel.)
Question: If a recession were to occur as a result of an inward shift in the AD function (see the diagram on the right panel), the result is: A) A decrease in the average price level (P), and an increase in real GDP (Y). B) An increase in the average price level (P), and an increase in real GDP (Y). C) An increase in the average price level (P), and a decrease in real GDP (Y). D) A decrease in the average price level (P), and a decrease in real GDP (Y). E) No change in the average price level (P), and no change in real GDP (Y).
In a perfectly competitive market, if P > MC, then
A) too little output is being produced. B) too much output is being produced. C) production is efficient, as the firm is earning profits. D) the firm is paying a price for resources that is too high.
Refer to the information provided in Figure 6.4 below to answer the question(s) that follow.
Figure 6.4Refer to Figure 6.4. Bill?s budget constraint is AC. His budget constraint would shift to AD if the price of
A. black beans increased. B. bell peppers decreased. C. bell peppers increased. D. black beans decreased.