According to the Taylor rule, if inflation rises by 1 percent above its target of 2 percent, the Fed should:
A. Lower the real Federal funds rate by 0.5 percent
B. Raise the real Federal funds rate by 0.5 percent
C. Lower the money supply by 5 percent
D. Raise the money supply by 5 percent
B. Raise the real Federal funds rate by 0.5 percent
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When the government cuts the income tax rate, the real wage rate paid by employers ________ and the real wage rate received by workers ________ and potential GDP ________
A) increases; increases; increases B) decreases; decreases; increases C) increases; decreases; increases D) decreases; increases; decreases E) decreases; increases; increases
Monetarists have argued that since velocity __________, this shows that shifts to the investment demand function must __________
A) is rather stable; cause the private economy to be unstable B) is rather stable; be offset by interest rate changes C) moves counter-cyclically; cause the private economy to be unstable D) moves counter-cyclically; be offset by interest rate changes
In the simple accelerator theory an
A) increase in actual sales will always lead to an increase in investment. B) increase in actual output will not lead to an increase in expected sales. C) increase in actual sales will lead to an increase in replacement investment. D) increase in the size of the increase in actual sales will lead to an increase in next period's net investment.
The rate of return on capital is
A) much higher in rich countries than in poor countries. B) much lower in rich countries than in poor countries. C) not substantially higher in poor countries than in rich countries. D) not substantially higher in rich countries that in poor countries.