Which of the following is likeliest to have decreased at point D?
a. disposable income
b. household assets
c. household spending
d. the tax rate
d. the tax rate
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Starting from a long-run equilibrium, a reduction in potential output leads to ________ gap in the short run and to a___ rate of inflation in the long run.
A. a recessionary; higher B. a recessionary; lower C. an expansionary; higher D. an expansionary; lower
Explain the law of diminishing marginal utility. How does it relate to the shape of the demand curve?
What will be an ideal response?
According to the Taylor rule ________
A) expectations are formed in an adaptive fashion B) the central bank should set its federal funds rate target by a formula that puts weight on both output and inflation gaps C) a constant growth rate rule for money should be adopted D) expectations should be formed consistent with the model of rational expectations
Moral hazard occurs when:
a. Individuals and institutions do not bear the full cost of their own mistakes. b.Individuals and institutions make immoral decisions based on greed. c. General social decay leads to unethical business decisions. d. Warning lights for potential economic hazards are ignored. e. All of the above are examples of moral hazard.