Can an economy expect to attain an unemployment rate of zero? Why or why not?
What will be an ideal response?
An economy will never attain an unemployment rate of zero. There is always some “normal” unemployment consisting of frictional unemployment. Frictional unemployment includes workers who are temporarily between jobs or have newly entered the labor force. No one can expect to get a job instantaneously—there is always some search time. The minimum rate of unemployment is the full-employment unemployment rate, which equals frictional unemployment in an otherwise fully employed labor force.
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In the United States in 2014, the highest marginal tax rate for individual income taxes was 39.6%
Indicate whether the statement is true or false
When the Fed buys government securities, it:
A. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public. B. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public. C. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public. D. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
To help reduce the price level, the government could:
A. run budget deficits. B. decrease taxes. C. increase government spending. D. run budget surpluses.
The Federal Reserve System performs many functions, but its most important one is:
A. controlling the money supply. B. supervision of commercial banks. C. issuing currency. D. lending money to banks and thrifts.