Suppose that real GDP starts at 100 and grows at a rate of 10 percent per year for two years. In the third year real GDP would be:
A. 110.
B. 110.1.
C. 120.
D. 121.
Answer: D
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A good economic model
A) describes every aspect of the economic world, with no exception. B) includes all those features of the world that can be described numerically. C) includes only those features of the world that are needed for the purpose at hand. D) should not include more than two variables.
The difference between black market and gray market activities is:
A. while neither are included in GDP, black market items are illegal and gray market items are not. B. while neither are include in GDP, gray market items are illegal and black market items are not. C. black market items are very rare and difficult to find, and gray market items are more commonplace, like babysitting. D. black market items are typically expensive items, and gray market items are not.
During the period from 1945 to 1975, the debt to GDP ratio
a. remained steady. b. rose slightly. c. increased rapidly. d. fell steadily.
Given the following Taylor rule:Target federal funds rate = natural rate of interest + current inflation + 1/2(inflation gap) + 1/2(output gap);Since the coefficients on the inflation and output gaps are equal, does this mean the central bank will respond to a one percent increase in inflation with the same change in the target rate as they would initiate from a one percent increase in the output gap? Explain.
What will be an ideal response?