Why does the Fed have imperfect control over the money supply over short periods?
a. Because of unpredictable changes in reserve requirements
b. Because the public responds to open market operations in unpredictable fashions
c. Because the Fed does not know how much reserves will change when it buys or sells securities
d. Because of unpredictable changes in public desire to hold cash and banks' desires to hold reserves
d
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The curve that reflects the view that when tax rates are too high, lowering them not only creates greater incentive for suppliers to increase production, but ends up generating higher tax revenues, is known as the:
a. Phillips curve. b. Laffer curve. c. Engel curve. d. Rational expectations curve. e. consumption curve.
Consider the indifference curve-budget line model of labor supply, and assume consumption and leisure are both normal goods. A higher wage rate would result in
a. more consumption and less leisure. b. a reduction in the worker's marginal value of leisure. c. reduced consumption if the income effect is larger than the substitution effect. d. increased labor only if the substitution effect outweighs the income effect.
Which of the following is a good measure of economic prosperity?
a. The level of real GDP b. The growth rate of real GDP c. The level of nominal GDP d. The price level
When the interest rate is so low that the opportunity cost of holding money is zero, then economists say we have reached:
A) the era of total liquidity. B) the zero lower bound situation, which means the U.S. economy may be in a liquidity trap. C) full monetary saturation. D) a situation in which a nation must use caution, since monetary policy is "super" effective.