As a result of an increase in the supply of a good, the equilibrium quantity ________ and the equilibrium price ________
A) increases; falls
B) increases; rises
C) decreases; falls
D) decreases; rises
A
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Consider the Taylor rule for the target of the federal funds rate
Suppose the equilibrium real federal funds rate is 2 percent, the target rate of inflation is 3 percent, the current inflation rate is 3 percent, real GDP equals potential real GDP, and the weights are 1/2 for the inflation gap and the output gap. Using the Taylor rule, what does the target for the federal funds rate equal? Next, if the Federal Reserve lowered the target for the inflation rate to 1 percent, how much would the target for the federal funds rate change?
Using the information contained in Situation 20-1, if planned investment decreases by $100, the equilibrium aggregate output will change by
A) -$1,000. B) $-100. C) $100. D) $1,000.
Visit the home page of the World Trade Organization
Questions:
- What is the primary function of this organization?
- What is the GATT? Discuss the economic rationale for agreements such as the GATT.
If suppliers have rational expectations, what will be their expected price of grapes?
The following tables show the demand and supply for grapes. Demand is uncertain, with D1 and D2 each occurring 50% of the time. Suppliers must base their decisions on the expected price and must sell all grapes they bring to the market at the going market price.
a. $2.00 per pound.
b. $2.50 per pound.
c. $3.00 per pound.
d. $3.50 per pound.