How does conventional monetary policy work?
A. Fed selects target rate, uses OMO to change supply of reserves, and changes money supply to move to target
B. changes supply of bank reserves through OMO, changes price of reserves, Fed Funds rate changes other interest rates
C. changes money supply through OMO, changes Fed Funds rate
D. all of the above
Ans: D. all of the above
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If the United States has a $300 billion trade deficit, then there must be:
A. net capital inflows of $300 billion. B. net capital outflows of $300 billion. C. net capital inflows of -$300 billion. D. no capital inflows or capital outflows.
What is a recession?
What will be an ideal response?
The graph above shows the market for a product where S1 is the original supply curve and S2 is the new supply curve following a tax on producers to reduce pollution. The tax per unit of output is:
A. BG. B. AJ. C. AB. D. AC.
In the above figure, suppose the economy is in equilibrium at point A. The Fed engages in an expansionary monetary policy that is fully anticipated by the public. Other things being equal, what point represents the new equilibrium according to the rational expectations theory?
A. A B. B C. C D. D