Classical economists or modern day monetarists would suggest that the Fed should
a. always lower the discount rate in order to combat recessions
b. increase the reserve requirement in order to reduce the threat of inflation
c. set the rate of increase in the money supply to be approximately equal to the economy's long-run full-employment rate of growth
d. set the rate of increase in the money supply to be approximately equal to the discount rate
e. use its tools, such as raising the discount rate, increasing the reserve requirement,and selling securities, in order to bring inflation down to 0 percent
C
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In the U.S., banks
A) cannot be forced to sell assets that the bank examiner deems too risky. B) can be forced to sell assets that the bank examiner deems too risky. C) can be forced to sell assets that the bank examiner deems too risky only after a court order. D) can be forced to sell assets that the bank examiner deems too risky only after both examiners from the Fed and from the FDIC agree. E) can be forced to trade assets that the bank examiner deems too risky.
Two firms engage in Bertrand competition in differentiated products. After doing all the appropriate calculations, you find the best-response functions are PB = 2.5 + .15PC and PC = 1.5 + .075PB. Without doing any further calculations, can you determine the relationship between their Nash equilibrium prices?
a. Yes, PB > PC b. Yes, PC > PB c. Yes, PB = PC d. No; it cannot be determined.
Savings and investment are equal:
A. at the equilibrium in the market for loanable funds. B. because banks regulate their flow. C. at an interest rate set by the Fed. D. when banks operate according to banking regulations.
The real value of any variable is its nominal value:
A. adjusted for inflation. B. holding the base constant. C. holding the basket constant. D. adjusting for income.