Suppose that consumer and business confidence fall. What is the ultimate outcome for the economy if monetary policymakers respond to keep inflation on an unchanged target?
A. If monetary policymakers respond, output would rise above potential output.
B. If monetary policymakers respond, output would remain close to potential output.
C. If monetary policymakers respond, output would remain close to potential output but inflation would still rise despite their actions.
D. If monetary policymakers respond, output would fall below potential output.
Answer: B
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Adjustable rate mortgages
A) reduce the interest-rate risk for financial institutions. B) benefit homeowners when interest rates rise. C) generally have higher initial interest rates than conventional fixed-rate mortgages. D) allow borrowers to avoid paying interest on portions of their mortgage loans.
The phase out of the subsidies for the purchase of health insurance will increase the implicit marginal tax rate on earnings for which of the following groups?
a. The elderly. b. Individuals and families with incomes between 133 percent and 400 percent of the poverty level. c. Individuals and families with incomes of more than 400 percent of the poverty level. d. All workers employed by firms with fewer than 50 full-time employees.