Econ Unit 3
move dot up line stay same
Over the past quarter, the inflation rate has risen from 2% to 4%. In response, the Federal Reserve has raised the real interest rate. Use the graph to show this change.
Discounting Formula
PV= FV/(1+R)^t
increases the amount of loanable funds available for others to use, thus increasing the supply of loanable funds.
Paying off these student loans
2
What percentage of federal government spending comes from science and international affairs? Share of federal spending:
An increase in the federal funds rate
What would cause a change in the marginal cost and benefit of making a loan?
run a budget deficit.
When government spending exceeds government revenue, the government will:
less than; negative
When many of the resources in an economy are left unused, GDP is expected to be _____ potential output, and the output gap will be _____.
more; save today instead of spending
When the Fed acts to raise interest rates, borrowing becomes _____ expensive, which encourages consumers to _____.
expansionary; AD line forward
When the economy experiences a recession, the Federal Reserve pursues monetary policy. Use the AD-AS graph to show the impact of this monetary policy.
contractionary; AD line back
When the economy experiences high inflation, the Federal Reserve pursues monetary policy. Use the AD-AS graph to show the impact of this monetary policy.
0%
When the economy is producing at its maximum sustainable level, what is the output gap?
dot down
low levels of output across the emtire economy
no change
n the long run, a 50% increase in the price level of an economy will result in _____ in the quantity of goods and services produced.
a period of declining economic activity.
A recession is:
trough
A _____ is a low point in economic activity.
output; the price level
A change in aggregate demand, either an increase or a decrease, will result in a large change in _____ and no change in _____ in the very short run.
real interest rate; a lower
A higher _____ will result in _____ aggregate expenditure level.
supply; right
A higher price of inputs used to make final goods and services will shift the aggregate _____ curve to the _____.
movement along
A lower price level that leads the Fed to cut interest rates results in a the aggregate demand curve.
an expansion of the business cycle.
A lower real interest rate will increase aggregate demand and thus encourage:
This can only continue for limited time because eventually factories will need to make repairs, and people will want to reduce their hours.
A politician makes the following comment: "The fundamentals of our economy are very strong. According to market economists, we are producing more than anyone expected and even beyond what they call our potential output. My goal is to guarantee that we continue to produce more than our potential output throughout the next few decades." In the long run, can the politician achieve this goal?
increases; new laptop minus the value of the old laptop
A salesperson drops his laptop on the way to a big meeting, and his IT department buys a new replacement the next day. This purchase the capital stock by the value of the
the whole economy; total output
Aggregate demand and aggregate supply are directly related to ________ because they look at measures such as _____ and average prices.
irrelevant
Aggregate demand is in determining output in the long run.
overheating; lowers interest rates
An economy might be at risk of _____ when the Fed _____ to create a short-term economic boom.
4.75
An increase in consumer and business confidence pushes output to 2% above potential output, while inflation rises to 3.5%.
shift of
An increase in government purchases results in a the aggregate demand curve.
shift of
An increase in oil prices leads to a the aggregate supply curve.
movement along
An increase in the general level of prices results in a the aggregate demand curve.
higher interest rates and inflation
As the economy recovers, political pressures lead the government to keep this spending in place. Possible long-run consequences of making this increased spending permanent include which of the following?
taxes
As the economy slows, the automatic decrease in will help stabilize the economy.
make it harder for the government to borrow more funds.
Assume that a government has missed a rescheduled loan repayment. High and rising government debt would:
2.5
Assume the equilibrium unemployment rate is 5%. If actual output falls to 5 percentage points below potential output, how would you expect the unemployment rate to change? (Note: Specify your answer to one decimal place, if necessary.) The unemployment rate would change by percentage points.
strong; excess; higher
At high output levels, when the economy is relatively , businesses face demand and marginal costs, compelling them to raise their prices.
weak; insufficient; lower
At low output levels, when the economy is relatively , businesses facedemand andmarginal costs, compelling them to lower their prices.
15
At the macroeconomic equilibrium of $17 trillion, what is the price level?
supply; increase; right; decrease; increase
Automation by the largest shipping and transportation companies has significantly decreased the transportation costs for businesses across the country. Aggregate will and shift to the The price level will and the quantity of output will
should; greater than
Based on the marginal principle, the owner make this investment because the marginal benefit is the marginal cost.
slower; changing prices and wages
Changes in aggregate supply are often _____ than changes in aggregate demand because suppliers need to make adjustments such as _____.
not involved
Dana buys $1,200 of stocks every year in her IRA.
much rarer; outside factors
Deflation is _____ than inflation because inflation has its own momentum as it is determined by _____.
it will decrease
Economists expected GDP to grow at an annual rate of 3%. It was recently annouced that GDP grew at an annual rate of 2%. What do you expect to happen to the S&P 500?
movement along
Excess demand leads to higher prices and a the aggregate supply curve.
raising; limited production capacity and are unable to expand it.
Excess demand results in firms _____ their prices because they have:
the government's use of spending and tax policies in an attempt to stabilize the economy.
Fiscal policy refers to:
the government provides a basic income and health care to almost all Americans over the age of 65
Four out of every 10 dollars the federal government spends go to the elderly or disabled. This spending is largely because:
demander
Gerardo borrows $30,000 from his local bank for a new addition to his warehouse.
rises; more
Government spending _____ automatically during a recession because when income falls, _____ people qualify for government benefits.
crowding out.
Government spending that results in less private spending, particularly in investment, is referred to as:
remain the same; decrease
Government spending will and government revenue will .
supply; production costs
Higher input prices, such as those caused by a sudden shortage of oil, will shift the aggregate _____ curve to the left because higher input prices mostly impact _____.
If a higher minimum wage increases unemployment, government spending on social insurance programs will increase.
How can the minimum wage increase government spending?
Use seasonal adjustment
How could you deal with a data series that experiences severe spikes during certain times of the year?
unemployment
If GDP is rising, which of these would NOT be expected to rise at the same time?
$25.5 trillion
If U.S. consumption spending is $14.2 trillion, investment spending is $8.3 trillion, government spending is $4 trillion, and net exports are -$1 trillion, what is the U.S. GDP?
increased; rising
If an increase in nominal GDP were discovered, it would be difficult to tell whether it was a result of _____ prices or _____ output.
cutting; decrease; increase; rise
If inflation is below the Fed's target rate, the Fed will react by the interest rate. This will the opportunity cost of spending, and people will their consumption and investment. As people spend more, aggregrate expenditure will .
falls; increase
If the Fed pushes rates down the opportunity cost of borrowing . The level of output in the economy should .
lower; weak output
If the Federal Reserve saw a GDP growth of 0.3% from one year to the next, it would likely _____ interest rates due to _____.
lower; low inflation
If the Federal Reserve saw that price levels increased by 0.2% from one year to the next, it would likely _____ interest rates in response to _____.
4%
If the actual unemployment rate in the United States is 3% and the output gap is -2%, what would be a good approximation of the equilibrium unemployment rate according to Okun's rule of thumb?
procyclical; destabilize
If the discretionary fiscal policy fails to act quickly enough to boost spending, the policy will become _____, causing the economy to _____.
3%
If the equilibrium unemployment rate is 5%, the potential GDP is $15 trillion, and the actual GDP is $14.4 trillion, what is the approximate unemployment rate according to Okun's rule of thumb?
$14.4 trillion
If the output gap in an economy is -4% and potential GDP is $15 trillion, what is the actual GDP?
$13.36 trillion
If the output gap in an economy is 2.8% and the potential GDP is $13 trillion, what is the actual GDP?
2.5
If the potential GDP is $16 trillion and the actual GDP is $15.2 trillion, about how many percentage points lower than the equilibrium unemployment rate will the actual unemployment rate be?
3
If the potential GDP is $18 trillion and the actual GDP is $16.92 trillion, about how many percentage points lower than the equilibrium unemployment rate will the actual unemployment rate be?
very short run; short run; medium run; long run
In the , prices are fixed, as businesses have no time to change prices immediately following an economic shock. The , by contrast, allows businesses time to respond to insufficient demand by adjusting some prices, while others remain fixed, owing to price stickiness and menu costs. A year or two later, in the , prices will be less sticky; hence, more businesses will adjust their prices to existing economic conditions. Finally, in the , all businesses will fully adjust their prices to existing demand conditions, restoring output to potential.
no change
In the long run, a 110% increase in the price level of an economy will result in _____ in the quantity of goods and services produced.
potential output
In the long run, a change in prices has no impact on output as the economy gravitates toward its . Market prices adjust to ensure that the demand for labor, capital, and raw materials will be equal to the supply.
the quantity produced; the prices charged for goods and services
In the short run, suppliers adjust to economic shocks by shifting _____. In the long run, suppliers adjust to shocks by changing _____.
horizontal; vertical; upward-sloping; steeper
In the very short run, the aggregate supply curve is ; in the long run, it is . In the short run and medium run, the aggregate supply curve is . However, in the medium run, the aggregate supply curve is than it is in the short run.
You are analyzing economic growth over the past few quarters to extract a trend that enables you to predict economic growth over the next year.
In which of the following scenarios is it most appropriate to use seasonally adjusted data?
2001 and 2009
In which year or years did Turkey experience a recession?
increase aggregate expenditure.
Increased government purchases directly:
is participating.
Is a student with student loan debt participating in the market for loanable funds? The student
excess reserves; floor
Kyro bank can leave its extra cash in a reserve account and earn a 2% return with no risk of losing money. It will not take the money out of the account unless its return will be greater than 2%. This shows the interest rate on _____ effectively acting as a _____ on the interest rate at which banks will loan their funds.
the unemployment rate
Labor market performance
movement along
Lower output leads to excess capacity and a the aggregate supply curve.
.8
Make a prediction about what you think the output gap will be in the second quarter of 2019. Explain your reasoning. Predicted output gap:
the level of output that occurs when all resources are fully employed.
Potential output is:
higher
Predict how the Fed would likely respond if the output gap became more positive, so that output moved from being 0.1% above potential output to being 3% above potential output, and inflation rose above its 2% target rate. The Fed would likely set a interest rate target.
the current state of the economy
Pursuing a graduate degree program, deciding whether to quit your job because you dislike your boss and purchasing a new car are all decisions that are affected by:
unconventional; federal funds rate
Quantitative easing is considered monetary policy and may be used when the has hit the zero lower bound.
long term; downward
Quantitative easing is when the Fed buys government bonds and securities in order to put pressure on long‑term interest rates.
federal
Social insurance programs plus spending on military and veteran's benefits account for about 80% of government spending.
direct and transparent communication
Stable inflation expectations
shifting the quantity produced
Suppliers initially react to economic shocks by _____. In the long run, suppliers adjust to economic shocks by changing the prices charged and wages paid.
The stock market
Suppose that your biggest concern is spotting economic downturns before they occur and that you are not very worried about accidentally predicting an economic downturn when there will actually not be one. Which of these economic indicators would you likely watch most closely?
increase in aggregate supply
Suppose the government passes a new law providing companies with low-cost alternative energy sources such as solar and wind. This would lead to a(n):
movement along
Technology that raises productivity leads to a the aggregate supply curve.
A price increase in sunscreen due to increased demand during the summer
The AD-AS model does NOT describe which of the following scenarios?
A spending change leading to a shift in employment resulting in lower demand in the economy and a lower GDP
The AD-AS model would be used to interpret which of the following scenarios?
federal funds rate; open market operations
The Fed adjusts the by buying and selling short‑term government bonds. This tool is called .
shift of
The Fed increases the interest rate more dramatically than the systematic inflation-induced response. This results in a the aggregate demand curve.
demand; increase; right; increase; increase
The Mexican government eliminates the tariffs it charges on goods exported from the United States. Aggregate will and shift to the The price level will, and the quantity of output will
Investors believe future profits will be higher than previously expected.
The S&P 500 has been increasing steadily over the last several months. What does this signal about how investors view future profits?
AS line back
The US dollar depreciates relative to the Chinese yuan
all suppliers; price level
The aggregate supply curve describes the production and pricing decisions that _____ make and how they will adjust their production given changes in the _____.
local
The biggest chunk of government spending goes to public primary and secondary education, followed by smaller chunks for various community services.
short-term fluctuations in economic activity.
The business cycle refers to: Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices
the flow of new borrowing; the accumulated stock of borrowing
The deficit measures _____ over a year, while the debt measures _____ at a point in time.
the interest rate on loans that the Fed offers to banks through the discount window.
The discount rate is:
3%
The equilibrium unemployment rate in the United States is 5%. If the output gap is -4%, what is the approximate unemployment rate in the United States, according to Okun's rule of thumb?
Medicare.
The federal government created a single-payer health care system for the elderly, which is called:
demand; increase; right; increase; increase
The federal government passes a new bill that dramatically increases government spending on education and the military. Aggregate will and shift to the the price level will, and the quantity of output will
taxing people's incomes; taxing people's spending
The federal government primarily collects revenue by _____, while state and local governments focus more on _____.
a publicly stated goal for the inflation rate.
The inflation target refers to:
11.14
The manager of a T-shirt company is considering investing in a new embroidery machine that costs $8,500, and the depreciation rate is 6.5% per year. The expected increase in next year's revenue as a result of the investment is $1,500. For what values of the interest rate (r) should the company make this investment? Specify the answer to two places beyond the decimal point. Any r below
the tax rate you pay if you earn another dollar.
The marginal tax rate refers to:
Equilibrium
The microeconomic forces of demand and supply are similar to the macroeconomic forces of AD and AS because occurs where the curves cross.
products; time
The opportunity costs of buyers in the micro context of a single market differ from those of all buyers in the macro context of aggregate demand, as they summarize different trade-offs. In the micro framework, the key trade-offs are across , while in the macro framework, the key trade-offs are across .
similar to; small and unpredictable
The output gap in one time period is typically the output gap in the next time period. Changes in the output gap over time are usually
real GDP
The overall size of the economy
Government purchases
The purchase of a new floor for the local city municipal basketball court would be categorized as what factor of aggregate expenditure?
Net exports
The purchase of a new iPhone 11 by a consumer from Japan would be categorized as what factor of aggregate expenditure in the US GDP?
the aggregate demand curve.
The relationship between the price level and the total quantity of output that buyers collectively plan to purchase is defined as:
the aggregate supply curve.
The relationship between the price level and the total quantity of output that suppliers collectively produce is defined as:
steeper; less steep
The short-run aggregate supply curve will be _____ than the very-short-run aggregate supply curve and will be _____ than the medium-run supply curve.
move line forward
The unemployment rate has increased over the past quarter. In response, the Federal Reserve has lowered the real interest rate. Use the graph to show this change.
increase
This policy will the number of electric cars sold.
monetary policy; interest rates
Today, the Federal Reserve moderates the economy by the use of _____ and _____, whereas historically, the Fed relied on changes in the money supply.
demand; decrease; left; decrease; decrease
Top executives report that they're quite uncertain about the future, as trade deals with the country's largest trading partners are being renegotiated and remain in flux. Aggregate will and shift to the The price level will and the quantity of output will
3077
What is the present value of the stream of revenue due to the upgrades? Round to the nearest dollar.
nominal variables; real variable
Using the classical dichotomy, an increase of 10% in price levels of the economy will result in no change in the quantity produced because price levels are _____ and quantity produced is a _____.
The Fed is generally good at influencing the actual federal funds rate so that it matches the target federal funds rate.
What does this image say about monetary policy?
What does this image say about the Fed's monetary policy?
What does this image say about the Fed's monetary policy?
more than; multiplied; income
When the government increases its purchases by $100 billion, it will increase GDP by $100 billion. An increase in spending has a effect on aggregate expenditure. This effect arises because one person's spending is another person's .
Expansionary policies reduce the adjustment time needed to return the economy to potential output. Expansionary policies will help increase employment in the short term and reduce the hardships of those who have lost jobs due to the recession.
Which of the following are advantages that the argument may overlook with regard to expansionary fiscal and monetary policies.
II only
Which of the following changes would NOT result in a shift of the aggregate demand curve due to the Federal Reserve's response? I. A rise in corporate taxes II. A rise in inflation III. An increase in oil prices due to an embargo
The Federal Reserve wishes to increase output so it develops a monetary policy that alters interest rates and submits it for congressional approval.
Which of the following scenarios conflicts with the structure of the Federal Reserve?
D
Which of the letters in the graph corresponds to the aggregate supply curve in the short run?
A
Which of the letters in the graph corresponds to the long-run aggregate supply curve?
Each recession is different.
Which of these BEST explains how the quote "every unhappy family is unhappy in its own way," from the novel Anna Karenina, applies to economics?
Every business cycle is unique, but all business cycles share some common features.
Which of these correctly describes business cycles?
Protect individual wealth
Which of these is NOT a purpose of social insurance?
The government usually brings in enough revenue to pay for all its spending.
Which of these is NOT true about government spending and revenue? Please choose the correct answer from the following choices, and then select the submit answer button. Answer choices
Many firms will avoid hiring parents when a regulation requires employers to pay for parental leave.
Which of these shows that people will adjust their behavior in response to regulation?
Budget deficits during a war are typically small.
Which of these statements is NOT true of government spending during a war?
Things often go wrong in an economy.
Why can it be said with confidence that the average person will experience a number of recessions during his or her lifetime?
If the Fed is keeping inflation too low, this may indicate that it is not being aggressive enough at boosting output and employment
Why might an economist argue that the Fed is keeping inflation too low?
Initial unemployment claims
You are collecting data on GDP, GDI, nonfarm payrolls, and initial unemployment claims to track the state of the economy. Which of these indicators will you receive data from most regularly?
.09
You are working at the campus bookstore, earning $9.00 per hour. Your manager tells you that in the upcoming year, you will get a 2% raise. a. What is the approximate change in your real wage if inflation is 1%?
Annualized rate
You have collected data from nonfarm payrolls over the last seven months and data from initial unemployment claims over the past two months. Which of these would make it easier to compare the data you have obtained?
no, because you are just buying an existing asset without creating any new productive capacity in the economy.
You invest $1,000 in stocks. Would a macroeconomist call this an investment? Why or why not? An economist would say
140712.62
You want $1 million in your retirement account in 50 years. If your account grows at an annual rate of 4%, how much do you have to deposit today to reach $1 million in 50 years?
Real GDP
_____ is/are the broadest measure of economic activity.
Expansions; gradual
_____ tend to be _____ as the economy recovers and grows.
AS line back
congress passes a bill that increases federal minimum wage...
AS line forward
the implementation of artificial intelligence...
you believe the change in the federal funds rate will be long‑lasting.
you would change long‑term rates if
A government regulation
A politician says, "We could help low-wage workers by offering them tax credits like the earned income tax credit, but it would be cheaper to do it by raising the minimum wage because that would cost the government nothing." a. What type of policy is the minimum wage?
increased, because there is a positive correlation between capital per worker and output per worker.
Capital per worker in China almost doubled between 1990 and 2010. How do you expect China's output per worker to have changed over the same period? Why? Output per worker probably
$400 million.
Eastland's government has a total national debt of $500 million, which is financed as follows: $100 million is held by other government agencies, $200 million is held by Eastland's citizens, and $200 million is held by foreign citizens. The amount of public debt in Eastland is:
Compounding Formula
FV= PV * (1+R)^t fv- future value pv-present value R- interest rate t-number of years
falls and tax payments rise to help keep the economic expansion in check
How do automatic stabilizers respond when output is above potential output?
pay more than $2,500 in taxes each year.
In an effort to encourage people to purchase electric cars, the federal government passes a tax credit of $2,500 for each new electric car that is bought in the United States. a. This policy will primarily benefit those who
aggregate demand; aggregate supply
In the AD-AS model, AD stands for _____ and AS stands for _____.
using quarterly data to describe or predict trends that occur over the course of a year.
It is appropriate to use seasonally adjusted data when you are
consumer price index; GDP; unemployment
Lagging indicators
follow
Lagging indicators are variables that tend to the path of the economy.
consumer confidence; stock market; business confidence
Leading indicators
predict
Leading indicators are variables that tend to the path of the economy.
The share of GDP spent on these programs will increase.
Low birth rates mean that the share of the population that is working-age will fall over the next few decades. What impact will this have on spending on Medicare and Social Security?
a vehicle
Often assets you purchase depreciate over time and lose value. Which of these do you expect to depreciate?
state
On average, half of government spending goes to employment and income support, and one-fifth goes toward education.
vary significantly
Recessions in their severity.
short; longer
Recessions tend to be in duration. Expansions are often than recessions.
data stripped of predictable seasonal patterns.
Seasonally adjusted data are
capital deteriorates over time due to depreciation today's capital stock is the accumulation of many years of investment, so a change in spending for one year has relatively little effect on overall capital stock
Select each response which helps explain why big changes in investment have relatively small impacts on the amount of capital in the economy. One reason is that
shifts the supply curve of loanable funds to the right, decreases the neutral interest rate and increases the equilibrium quantity of loanable funds.
Suppose your roommate's parents open a college savings account to pay for her college expenses. Opening a college savings account
use forward guidance; use quantitative easing
The Fed has decreased the federal funds rate—a nominal short‑term interest rate—to 0%, and yet the economy is still struggling. Which of the following actions could the Fed take to further stimulate the economy?
limits the severity of financial crisis; prevents potentially destructive failures of major financial institutions
The Fed's lender of last resort function gives rise to which of the following tradeoffs?
Interest payments on the federal debt will consume a larger portion of the federal budget, potentially displacing other government priorities. Higher government debt may make future borrowing more difficult.
The president has just signed a new budget that drastically cuts taxes without decreasing government spending. When asked how he plans to address the dramatic increase in deficits that will occur due to the tax cuts, the president responds, "We're going to see some amazing economic growth because of this new policy, so much growth that we're going to grow our way out of any short-term increases to government debt." If this extra economic growth doesn't materialize, what are some of the risks to the U.S. economy?
increased
Unemployment likely during each recession.
.75
Use the Fed rule‑of‑thumb to predict the Fed's target for the federal funds rate for each of the following scenarios if its estimate of the neutral real interest rate is 2%. a. A recession hits the economy, causing output to fall to 0.75% below potential output and inflation to fall to 1%.
vague and...
Volatile inflation expectations
the employment cost index
Wages and benefits
can pay its debt using options that households do not have in paying off theirs. can pay its debt over multiple generations, whereas individuals cannot.
What are some ways in which government debt differs from personal debt? Select all that apply. The government
wear and tear obsolescence aging
What causes depreciation?
That the fluctuations are not rhythmic and predictable.
What do economists mean when they say that business cycles are not cycles?
the amount of government debt rises
Which of the following occurs when investment is crowded out by government spending?
Extending the period in which unemployed workers can collect unemployment benefits
Which of the following would be an example of expansionary fiscal policy?
because they are leading indicators that tend to predict the future path of the economy
Why are consumer and business confidence indices helpful in making predictions about the state of the economy?
the maximum sustainable level of employment occurs when the economy's GDP is equal to its potential GDP.
Why does the Fed pay such close attention to GDP, if its mandate is to promote maximum employment while keeping prices stable?
false
Your friend's proposed cuts to science and international affairs spending would significantly reduce the size of the government.
is set by law, whereas discretionary spending is appropriated annually.
How does mandatory government spending differ from discretionary government spending? Mandatory spending
federal government spends the vast majority of its budget on the military and social insurance
How does the saying, "The federal government is an insurance company with a military," while exaggerating a bit, describe U.S. federal government spending? The saying is true because the
Changes in spending on these programs could be made each year.
How might future spending change if Medicare and Social Security were discretionary spending programs instead?
86
How much will the federal government spend on science and international affairs if the federal government's total spending is $4.3 trillion.
increase
How would you expect unemployment to change over the next year or two in response to the Fed's actions? b. If the Fed pursued this action, you would expect unemployment to over the next year or two.
fall
If consumer confidence indices have been falling for several months, you might expect consumer spending to
marginal cost; rises; falls; upward; raise
If the Fed raises the interest rate on excess reserves, the to banks of loaning money . The supply of loanable funds therefore , pushing interest rates , and banks, correspondingly, the interest rates they charge on car loans, mortgages, student loans, credit cards, etc.
Cyclically balanced budget
If the government of Balancia runs a deficit of $50 million per year in Year 1 and in Year 2 due to its recession, but then has a $100 million surplus in Year 3 due to strong economic recovery, Balancia is likely following which type of rule?
a period of time long enough for businesses to adjust prices and adapt to competitors' decisions.
In the AS-AD model, the long run is defined as:
expand
In the short run, the economy will likely due to the increased government spending.
supplier
Latisha wants to save up for a new laptop to use in her business, so she puts aside $100 a month in a bank account until she can save up for it.
decreases; the printing press
The New York Times decommissions an older printing press instead of repairing it, due to a decrease in print subscriptions. This decision the capital stock by the value of
annual growth of the S&P 500
The future trajectory of economic activity
increase
The increase in the federal funds rate will the interest rates on the business lines of credit and personal loans you make.
0
What is the approximate change in your real wage if inflation is 2%?
-.09
What is the approximate change in your real wage if inflation is 3%?
helps avoid the risk of deflation; enables the labor market to function more smoothly; enables the fed to more effectively fight recessions
Which of the following are reasons why the fed targets inflation greater than 0%
can influence unemployment with tools it uses to target inflation, since inflation and unemployment are interdependent. has many tools to influence inflation over the long run but none to influence unemployment over the long run.
Which of the following are reasons why the fed targets inflation....
A government stimulus program
Which of the following factors would cause the aggregate demand curve to increase?
opportunity cost of spending today; by varying interest rates, the Fed nudges people and businesses to spend more or less today, which affects the level of economy activity.
Why does the Fed use interest rates to influence the economy?
compel the government to cut spending to offset lost tax revenues, which decline during recessions. prevent the government from employing an expansionary fiscal policy, since increased government spending would have to be offset by increased taxes.
Why might requiring the federal government to balance its budget each year limit its ability to respond to an economic downturn? It would
212241.60
Your small business has a cash reserve of $200,000, earning 2% annual interest. How much will your cash reserve be worth in 3 years?