To fight unemployment and close a recessionary gap, the Fed ______
A. stimulates aggregate demand by lowering the federal funds rate, which increases the quantity of money
B. stimulates aggregate supply by lowering the federal funds rate, which increases potential GDP
C. increase employment, which increases real GDP
D. increases bank reserves, which banks use to make new loans to busi-nesses, which increases aggregate supply
A By lowering the federal funds rate, the Fed ultimately increases aggregate demand, which increases real GDP and lowers unemployment.
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When the inflation rate is zero, the
A) real interest rate is greater than the nominal interest rate. B) real interest rate is less than the nominal interest rate. C) nominal interest rate is zero. D) real interest rate equals the nominal interest rate.
The United States would be characterized as having:
A. a controlled domestic interest rate, an open capital market and a flexible exchange rate. B. a controlled domestic interest rate, an open capital market and a fixed exchange rate. C. no control over the domestic interest rate, an open capital market and a flexible exchange rate. D. a controlled domestic interest rate, a closed capital market and a flexible exchange rate.
A binding minimum wage
a. affects employees but not employers. b. lowers the productivity of workers. c. raises the cost of labor to firms. d. All of the above are correct.
By an "increase in demand," economists mean that:
A. product price has fallen so consumers move down to a new point on the demand curve. B. the quantity demanded at each price in a set of prices is greater. C. the quantity demanded at each price in a set of prices is smaller. D. a leftward shift of the demand curve has occurred.