The lending facility that allows any bank to borrow reserves from the Fed is called the:
A. reserve window.
B. discount window.
C. borrower of last resort.
D. reserve rate.
Answer: B
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If there are no externalities, a competitive market achieves economic efficiency. If there is a negative externality, economic efficiency will not be achieved because
A) a deadweight loss will occur that is equal to the area under the demand curve for the good. B) too much of the good will be produced. C) too little of the good will be produced. D) economic surplus is maximized.
If the Taylor Principle is not followed and nominal interest rates are increased by less than the increase in the inflation rate, then real interest rates will ________ and monetary policy will be too ________
A) rise; tight B) rise; loose C) fall; tight D) fall; loose
High demand for a product does not necessarily mean a high quantity demanded for that product if the price is high enough
Indicate whether the statement is true or false
Which of the following is NOT a reason why real GDP can be expanded beyond a level consistent with its long-run growth path in modern Keynesian analysis?
A) Higher prices induce firms to hire more workers. B) The existing capital stock can be used more intensively. C) Prices and wages are flexible, allowing for needed adjustments. D) In the short run, existing workers can work more hours.