The Federal Reserve has indirect control over short-term interest rates, and, as a result, their ability to control economic activity is through
A. residual demand.
B. the exchange rate.
C. aggregate supply.
D. aggregate demand.
Answer: D
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The figure above shows the marginal revenue, marginal cost, and demand curves for an airline offering daily flights between Los Angeles and Toronto. If the airline is regulated using a marginal cost pricing rule total surplus will be ________
A) $100,000 B) $60,000 C) $80,000 D) $20,000
The principle that states that what matters to people is the real value or purchasing power of money is the:
A. marginal principle. B. principle of diminishing returns. C. spillover principle. D. real-nominal principle.
The income elasticity of demand is
A. the percentage change in demand divided by the percentage change in income. B. the change in quantity demanded divided by the change in price. C. the percentage change in income divided by the percentage change in quantity demanded. D. the change in income divided by the percentage change in price.
The use of fiscal policy to stabilize the economy is limited because
A) changes in government spending and tax rates have a small effect on aggregate demand. B) changes in government spending and tax rates have a small effect on interest rates. C) the legislative process can be slow, which means that it is difficult to make fiscal policy actions in a timely way. D) the Internal Revenue Service (IRS) resists changes in tax rates because of all the changes they would have to make to the tax code.