For a fixed target real interest rate and target inflation rate, when inflation decreases, the Fed ________ interest rates, hence ________ short-run equilibrium output.
A. increases; increasing
B. decreases; decreasing
C. decreases; increasing
D. increases; decreasing
Answer: C
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Real GDP is $1,400 billion and nominal GDP is $1,800. The GDP price index equals
A) 100.0. B) 2.86. C) 77.0. D) 222.2. E) 128.6.
A movement upward and to the left along a demand curve is called a(n)
a. increase in demand. b. decrease in demand. c. decrease in quantity demanded. d. increase in quantity demanded.
Suppose that over the past year, the real interest rate was 6 percent and the inflation rate was 4 percent. It follows that
a. the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 2 percent. b. the dollar value of savings increased at 6 percent, and the purchasing power of savings increased at 10 percent. c. the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 2 percent. d. the dollar value of savings increased at 10 percent, and the purchasing power of savings increased at 6 percent.
During the last half of 2012, the U.S. unemployment rate was just under 8 percent. Historical experience suggests that this is
a. above the natural rate, so real GDP growth was likely low. b. above the natural rate, so real GDP growth was likely high. c. below the natural rate, so real GDP growth was likely low. d. below the natural rate, so real GDP growth was likely high.