Targeting interest rates can be procyclical because
A) an increase in income increases interest rates, causing the Fed to buy bonds, increasing the monetary base and money supply, leading to further increases in income.
B) an increase in interest rates increases income, causing the Fed to buy bonds, increasing the monetary base and money supply, leading to further increases in income.
C) an increase in the monetary base increases the money supply, causing the Fed to buy bonds, increasing the monetary base and money supply, leading to further increases in income.
D) an increase in income increases the monetary base and money supply, causing the Fed to buy bonds to increase interest rates and income.
A
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Using the figure above, if Jack and Jill specialize and gain from trade, then
A) Jack specializes on the production of soda and water. B) Jack specializes in the production of soda. C) Jack produces equal amounts of gallons of water and bottled water. D) Jack specializes in the production of bottled water. E) Jack and Jill produce beyond their PPF.
Because it takes time for workers to search for a job and for firms to search for new employees, there will always be some workers who are
A) frictionally unemployed. B) structurally unemployed. C) cyclically unemployed. D) seasonally unemployed.
Stock market analysts often argue that lower interest rates are good for the stock market. Does this argument make sense?
a. No; lower interest rates will tend to slow down the economy, and this will be bad for the stock market. b. Yes; the lower rates of interest will increase the value of future income (and capital gains), and stock prices will rise to reflect this factor. c. No; the lower rates of interest will reduce the value of future income (and capital gains), and this will cause stock prices to fall. d. Yes; the lower interest rates will cause inflation, and inflation is generally good for the stock market.
A labor contract provides for a first-year wage of $10 per hour, and specifies that the real wage will rise by 3 percent in the second year of the contract. The CPI is 1.00 in the first year and 1.07 in the second year. What dollar wage must be paid in the second year?
A. $11.02 B. $10.70 C. $10.90 D. $10.30