If the Fed were to set policy according to the Taylor rule, then if real GDP falls by 2 percent below potential GDP, the Fed should:
A. raise the real federal funds rate by 1 percentage point.
B. reduce the real federal funds rate by 1 percentage point.
C. raise the inflation rate by 1 percentage point.
D. change the real federal funds rate until inflation hits the target rate of 4 percent.
B. reduce the real federal funds rate by 1 percentage point.
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Assume declining profits in the market for Internet service force several firms in the area to drop out of the market Which of the following best describes the effect of the reduction in the number of service providers and the subsequent adjustment of the market to the new equilibrium price and quantity?
A) Quantity supplied would decrease, creating excess supply at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal. B) Quantity supplied would decrease, creating excess demand at the initial equilibrium price. Demand would then decrease until quantity demanded and quantity supplied are once again equal. C) Supply would increase, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached. D) Supply would decrease, creating excess demand at the initial equilibrium price. Price would then rise, causing quantity demanded to decrease and quantity supplied to increase until a new equilibrium is reached.
According to Keynes, the key difference between money and bonds is that
A) money is an asset. B) bonds are an asset. C) money is less risky. D) bonds are tax exempt.
Which of the following is an advantage that a sole proprietorship has over all other types of firms?
a. unlimited liability b. easy access to capital markets c. all decision making belongs to the owner d. shared liabilities e. small scale of operation
Every two weeks Hailey gets a check for the freelance work she does for Suzy’s Networking Services. This payment is a component of the ______ market.
a. product b. factor c. stock d. bond