According to the Taylor rule, if inflation equals 3 percent and there is an expansionary gap equal to 3 percent of potential output, the Fed will set a real interest rate of ________ percent and a nominal interest rate of ________ percent.
A. 1; 4
B. 4; 7
C. 4; 6
D. 1; 3
Answer: B
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Irving R. Associates is granted a patent for a new product for which there are no close substitutes. Which of the following must be true at the profit-maximizing quantity?
a. Price is equal to marginal cost. b. Average revenue is equal to marginal cost. c. Marginal revenue is positive. d. Marginal revenue is less than marginal cost. e. Price is greater than average revenue.
A negative supply shock causes stagflation in the short run
a. True b. False
Which of the following is a reason why the union wage gap might overestimate the actual effect unions have on wages?
A. Nonunion firms may pay higher wages in order to stave off unionization. B. Unions tend to negotiate better fringe benefits for their members than what nonunion workers receive. C. Higher union-negotiated wages likely attract more productive workers to union jobs. D. The union wage gap can be underestimated but never overestimated. E. Unionized workers tend to work more hours each week than nonunionized workers.
Answer the following statement true (T) or false (F)
1) Rational individuals may make different choices because their preferences and circumstances differ. 2) Choices entail marginal costs because resources are scarce. 3) The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment. 4) The production possibilities curve shows various combinations of two products that an economy can produce when achieving full employment.