According to Friedman, a person's marginal propensity to consume is determined by the person's
a. transitory income
b. permanent income
c. absolute income
d. marginal propensity to save
e. life cycle income
B
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Using the Taylor rule, if the current inflation rate equals the target inflation rate and real GDP is greater than potential GDP, then the federal funds target rate ________ the sum of the current inflation rate plus the real equilibrium federal
funds rate. A) will be the same as B) will be less than C) will be greater than D) may be greater than or less than
Which of the following options would be most likely to cause an increase in short-term real interest rates?
a. The Federal Reserve cuts the discount rate. b. The Federal Reserve lowers the reserve requirement. c. The Federal Reserve sells bonds in the open market. d. The federal budget is shifted toward a surplus.
Elasticity of investment measures the responsiveness of
A) interest rates to changes in investment. B) investment to changes in government spending. C) investment to changes in the interest rate. D) investment to changes in consumption.
Which good would be likely to be bought in the same quantity even if it doubled in price?
a. shoes b. telephones c. pencils d. computers