If the Federal Reserve announces that its target for the federal funds rate is falling from 3 percent to 2.25 percent, how do you expect workers and firms to react?
A) As long as the Fed's announcement is credible, workers and firms will increase their consumption and investment spending, which will increase aggregate demand and inflation.
B) As long as the Fed's announcement is credible, workers and firms will decrease their consumption and investment spending, which will decrease aggregate demand and inflation.
C) Workers and firms will incorporate the decrease in interest rates into their expectations of inflation, and they will expect inflation to fall as a result of Fed's policy announcement.
D) If the Fed's announcement is not credible, workers and firms will not expect inflation to rise so they will increase their consumption and investment spending, which will decrease aggregate demand and increase inflation.
A
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The figure above shows the market for cotton in Georgestan. The government regulates the market with a production quota set at 8 million pounds per year. The introduction of the quota has
A) not affected the level of cotton production in Georgestan. B) increased the production of cotton in Georgestan by 8 million pounds. C) decreased the production of cotton in Georgestan by 4 million pounds. D) decreased the production of cotton in Georgestan by 8 million pounds.
Which is not a result of regulation, or government intervention in a market?
(A) Influencing the price of a good. (B) Governing the quantity of a good. (C) Lowering the costs of production of a good. (D) Affecting the quality of a good.