finals 61-70
The Fed tries to keep the core inflation rate around:
2%
Expecting the inflation rate to be 3%, Tony decides to put his savings in a 12-month certificate of deposit yielding a fixed 6% interest rate. If the actual inflation rate is ________, it can be argued that ________ is (are) worse off.
below 3%; the bank issuing the certificate
During periods of deflation _____ will be hurt and _____ will be helped.
borrowers; lenders
The measure used by the Fed that excludes food and energy prices is the:
core inflation rate.
When Fed officials worried about the possibility of "Japanification" in the United States, it meant that they were worried that the U.S. economy would:
fall into a deflationary trap.
The liquidity trap is associated with all of the following EXCEPT:
fiscal policy becomes ineffective.
If the economy is in a liquidity trap:
fiscal policy is effective, but monetary policy is not.
When economists state that there is a zero bound on nominal interest rates, they mean that:
the nominal interest rate cannot go below zero.
A liquidity trap is a situation in which:
using expansionary monetary policy is not effective because the nominal interest rate is almost zero.
A liquidity trap results from the:
zero bound of the nominal interest rate.