Based on the figure below, the economy is initially at point A on the monetary policy reaction function (RF1) and the aggregate demand curve (AD1). The actual rate of inflation is ?' and the Federal Reserve's target inflation rate is ?*1. 
If the Federal Reserve lowers its target inflation rate to ?*2, then the Federal Reserve's monetary policy reaction function will ________ and the aggregate demand curve will ________.
A. shift to RF3; shift to AD2
B. shift to RF2; shift to AD2
C. shift to RF2: shift to AD3
D. shift to RF3: shift to AD3
Answer: C
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C. stayed relatively low, due to the lack of lending by banks, reducing the effectiveness of the money multiplier.
A. import, because they are assembled in China. B. import, because they are assembled in Mexico. C. export, because they are assembled in China. D. export, because they are produced in the U.S.
Which of the following is the correct formula for determining the unemployment rate?
a. [(The number of unemployed, working-age people seeking work)/(The number of people in the labor force)] x 100. b. (The total number of employed / The number of people in the labor force) x 100. c. (The total number of unemployed / The number of working-age people seeking work) x 100. d. (The number of people in the labor force / The number of working-age people seeking work) x 100.
Today's railroads are:
(a) Privately owned and regulated by competitive forces. (b) Private owned but managed by federal regulatory bodies. (c) Federally owned and managed by government regulatory bodies. (d) Federally owned but competitive.
If disposable income rises from $15,000 to $20,000 and the marginal propensity to consume equals 0.9, then saving must increase by $500
a. True b. False Indicate whether the statement is true or false