"Because monetary policy must be approved by the president of the United States, the president is chair of the Federal Open Market Committee." Analyze the previous statement—is it correct or incorrect?
What will be an ideal response?
The statement is incorrect on several dimensions. First, monetary policy does not need to be approved by the President of the United States. Second, the president of the United States is not chair of the Federal Open Market Committee, FOMC. Third, the president of the United States is not even a member of the FOMC! The chair of the FOMC is the chair of the Federal Reserve's Board of Governors.
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Define the following terms briefly and concisely
a. stock b. bond c. portfolio diversification d. speculation e. random walk
Tom produces commemorative t-shirts in a competitive market. If Tom decides to decrease his output, this will a. increase his revenue, since the output decrease leads to a higher market price
b. increase his revenue, since Tom's competitors will also decrease their output, so that price rises to offset the drop in Tom's output. c. decrease his revenue, since his output has decreased and the price remains the same. d. decrease his revenue, since the price does not rise sufficiently when output drops to offset the drop in Tom's output.
Answer the following statement(s) true (T) or false (F)
1. Fiscal policy usually refers to actions at the federal government level. 2. In the early 1980s, tax cuts put the U.S. economy in a recession. 3. The largest fiscal stimulus package ever was enacted under President Obama. 4. Tax cuts and increased government purchases shift the aggregate demand curve in opposite directions. 5. Tax cuts are a fiscal tool.
An externality can best be defined as
A) a party not directly involved in a transaction. B) a consequence of a transaction that spills over to affect third parties. C) a right of an owner to use and exchange property. D) a cost associated with the production of one more unit of output.