Suppose the nominal interest rate is five percent, and the inflation rate rises from two percent to three percent
Might an increase in the nominal interest rate to 5.5 percent be consistent with the Taylor Principle? If not, what consequences might ensue?
Yes, it might be. The Taylor Principle requires that the nominal interest rate rise by more than the increase in expected inflation. If expected inflation has not changed, or has increased by less than half a percentage point, then the increase in the nominal interest rate implies an increase in the real interest rate. If expected inflation has increased by more than 0.5%, then the real interest rate has declined, which will encourage more spending that might fuel further increases in inflation.
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Refer to Figure 2-4. A movement from X to Y
A) is the result of advancements in plastic production technology only, with no change in food production technology. B) could be due to a change in consumers' tastes and preferences. C) is the result of advancements in food production technology only, with no change in the technology for plastic production. D) could occur because of an influx of immigrant labor.
You acquire human capital by:
A. getting an education. B. investing in health care. C. gaining experience in jobs. D. All of these are true.
Buyers' expenditures and sellers' revenues are always identical
a. True b. False Indicate whether the statement is true or false
Economic models are used to:
A. explain every detail of an economic theory. B. explore decision making by individuals, firms and other organizations. C. build physical renditions of government construction projects. D. represent the complexities of economic environments.