The major problem facing the economy is high unemployment and weak economic growth. The inflation rate is low and stable. Therefore, the Federal Reserve decides to pursue a policy to increase the rate of economic growth. Which policy changes by the Fed would reinforce each other to achieve that objective?
A. Buying government securities and raising the reserve requirement.
B. Selling government securities and raising the discount rate.
C. Buying government securities and lowering the discount rate.
D. Selling government securities and lowering the discount rate.
Answer: C
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Decreases in the value of existing assets are called:
A. capital losses. B. investment. C. capital gains. D. saving.
What is the problem with paying plant managers in multi-plant firms according to the level of output they produce?
A) Managers in low-cost or high-capacity plants could be penalized, in percentage terms, for their overproduction. B) The production problem in multi-plant firms is usually how to lower production to increase market power, not how to increase production. C) Managers in high-cost or low-capacity plants could be penalized for production constraints over which they have no control. D) Managers would have an incentive to understate the productive capacity of their plants. E) Managers would have an incentive to overstate the productive capacity of their plants.
According to economists who explain the Phillips curve, a decline in the unemployment rate causes higher rates of inflation because
a. workers are concerned about protecting their jobs and so they accept smaller wage increases b. during periods of GDP growth, firms find it easier to pay higher wage rates and charge higher prices without worrying about losing markets c. firms decrease production and compete less aggressively for workers during periods of inflation d. workers feel less secure about their jobs and demand higher pay raises e. the Laffer curve comes into effect
If foreign input prices increase and the United States is a purchaser of those inputs, then the U.S
A) AD curve will shift leftward and U.S. prices will fall. B) AD curve will shift rightward and U.S. prices will rise. C) SRAS curve will shift leftward and U.S. prices will rise. D) SRAS curve will shift rightward and U.S. prices will fall