The federal funds rate increased from 2.5 percent in February 2005 to 5.26 in February 2007. This change in the federal funds rate clearly indicates that during this period the Fed followed a(n):
A. contractionary fiscal policy.
B. expansionary monetary policy.
C. expansionary fiscal policy.
D. contractionary monetary policy.
Answer: D
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If a product is an inferior good, then its income elasticity of demand is
A) zero. B) positive. C) negative. D) indeterminate. E) undefined.
In the above figure, to achieve efficiency, the government should
A) impose a tax of $2 per unit. B) impose a tax of $3 per unit. C) offer a subsidy of $2 per unit. D) offer a subsidy of $3 per unit.
As shown by the IS-LM model, there are two reasons that the Fed can lose control of the economy. One of these reasons is
A) federal funds rate can never reach zero percent. B) zero federal funds rate is not sustainable. C) household and business borrowers do not base their decision to borrow on interest rates. D) that the zero federal funds rate achieved by the Fed is irrelevant to household and business borrowers.
The average fixed costs of a firm equal
a. implicit costs divided by output. b. explicit costs divided by output. c. total cost minus variable cost. d. (total cost minus variable cost) divided by output.