According to the Taylor rule, if inflation has risen by 6 percentage points above its target of 2 percent, the Fed should:

A. grow the money supply at a rate of 6 percent per year.
B. raise the real federal funds rate by 6 percentage points.
C. raise the real federal funds rate by 3 percentage points.
D. raise the real federal funds rate by 12 percentage points.


C. raise the real federal funds rate by 3 percentage points.

Economics

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Net worth is

A) a measure of a firm's profits. B) the difference between a firm's assets and liabilities. C) part of stockholders' equity. D) listed on the asset side of a firm's balance sheet.

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The Arrow impossibility theorem suggests

A) democracies are doomed to fail in the long-run. B) dictatorships are impossible in the long-run. C) there is no universally applicable decision rule in a majority-rule democracy. D) there is no way to make democracy better than a dictatorship.

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Part of the normal aftermath of a period of excessive aggregate demand is

a. improvement in the quality of life. b. reflation. c. real GDP growth. d. stagflation. e. All of the above.

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A moral hazard problem occurs before a loan is made, and the adverse selection problem occurs after a loan is made

Indicate whether the statement is true or false

Economics