For a country like the United States, explain why the CPI would increase at a faster rate than the GDP deflator during periods of oil and gasoline price increases
The U.S. imports most of the oil it uses.
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Real interest rates at times have been negative. Why would anyone lending money agree to a negative real interest rate?
What will be an ideal response?
By the time Paul Volcker took office as the new Federal Reserve chairman in 1979, the inflation rate exceeded 10%. By 1982 the unemployment rate soared to 9.7% and inflation was cut to 6.2%
By the end of 1986 the unemployment rate was brought down to 7% and the inflation rate was brought further down to 1.9%. Which of the following is an appropriate description of the mechanism behind the Volcker Disinflation? A) The AD curve shifted right due to the autonomous tightening of monetary policy which explains the lowering of the unemployment rate between 1982 and 1986. B) With the Federal Reserve raising interest rates, the AD curve shifted to the left lowering the equilibrium level of inflation but inducing a negative output gap, which explains the lower inflation rate between 1979 and 1982 at the cost of a higher unemployment rate over the same period. C) The LRAS curve shifted left due to the tightening of monetary policy generating a positive output gap or a negative unemployment gap which explains the lowering of the unemployment rate between 1982 and 1986. D) all of the above E) none of the above
If a firm in a competitive market doubles its number of units sold, total revenue for the firm will
a. more than double. b. double. c. increase but by less than double. d. may increase or decrease depending on the price elasticity of demand.
The Federal Reserve System is composed of:
A. three branches with overlapping responsibilities. B. six branches with overlapping responsibilities. C. twelve branches with clear responsibilities. D. five branches with clear responsibilities.