How do the Fed's actions influence the inflation rate and how long does it take for inflation to respond to the Fed's policy changes?
What will be an ideal response?
The Fed's actions affect the inflation rate and the price level by changing expenditure plans. For instance, an expansionary policy by the Fed that lowers the interest rate increases consumption expenditure, investment, and net exports. All three of these changes boost aggregate demand so that the price level rises and the inflation rate increases. The effect on the price level and inflation rate is far from immediate because there are time lags in the process. The change in inflation is slower than the change in real GDP.
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In the figure above, a price of $15 per dozen roses results in
A) a shortage. B) a surplus. C) equilibrium. D) downward pressure on the price of roses. E) an eventual leftward shift of the demand curve and/or rightward shift of the supply curve.
When a Nash equilibrium is reached:
A. the outcome will only change if the "lead" player changes his strategy. B. no one has an incentive to break the equilibrium by changing his strategy. C. it must be true that all players have a dominant strategy. D. None of these statements is true.
Which of the following is considered to be the main disadvantage of the sole proprietorship form of business organization?
a. The proprietor and the firm are legally inseparable. b. The proprietor has personal independence. c. The focus of the proprietorship is on local markets. d. The access to local and family labor promotes legal dependence. e. The lack of a bureaucratic structure impedes growth.
A firm in China sells toys to a U.S. department store chain. Other things the same, these sales
a. increase U.S. net exports and decrease Chinese net exports. b. decrease U.S. net exports and increase Chinese net exports. c. increase U.S. and Chinese net exports. d. decrease U.S. and Chinese net exports.