What is the relationship between household saving and taxes?
a. taxes = income - consumption - household saving
b. household saving = income + taxes - consumption
c. taxes = income + consumption + household saving
d. household saving = consumption + income - taxes
e. taxes = household saving - income + consumption
A
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If market participants have rational expectations, then the best forecast of the price of a stock in the next period is
A) equal to an average of the prices of the stock in previous periods. B) equal to the price of the stock in the current period. C) dependent upon all information available in the current period, including, but not limited to, the price of the stock in the current period. D) dependent on information available in the previous period.
Suppose the output gap is zero, and policy makers wish to reduce the inflation rate from 10 percent to 5 percent. Which of these policies seems best?
A) contractionary policies to reduce output at least 5 percent below potential output B) a convincing declaration of the inflation rate target, so that expected inflation falls to 5 percent C) no policy action; inflation will fall on its own, eventually D) no policy action; inflation will converge to its long-run rate, regardless of policy E) price and wage controls to counteract their stickiness