If the Fed's policy reaction function equals r = .02 + p, where r is the real interest rate, p is the inflation rate. When the inflation rate is at the current target of 2%, then the real interest rate will be set at:
A. zero.
B. 4%
C. 2%.
D. 6%.
Answer: B
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Consider the perfectly competitive firm in the above figure. The shutdown point occurs at a price of
A) $11.00. B) $12.00. C) $16.00. D) $22.00.
Refer to Figure 3-2. An increase in the number of firms in the market would be represented by a movement from
A) A to B. B) B to A. C) S1 to S2. D) S2 to S1.
When individuals come together to buy and sell goods and services, they form a(n)
a. economy b. market c. production possibilities frontier d. supply curve e. demand curve
Use the following information to answer the next question.C = A + .75(Y - T)A = $900I = $600G = $400T = $400NX = -$200If the full-employment level of real GDP is $6,000, at the equilibrium level of real GDP, there is ________.
A. a recessionary expenditure gap of $100 B. an inflationary output gap of $400 C. a recessionary expenditure gap of $400 D. an inflationary output gap of $100