While a television news reporter might state that "Today the Fed raised the federal funds rate from 1 percent to 1.25 percent," a more precise account of the Fed's action would be as follows:
a. "Today the Fed told its bond traders to conduct open-market operations in such a way that the equilibrium federal funds rate would increase to 1.25 percent.".
b. "Today the Fed raised the discount rate by a quarter of a percentage point, and this action will force the federal funds rate to rise by the same amount.".
c. "Today the Fed took steps to increase the money supply by an amount that is sufficient to increase the federal funds rate to 1.25 percent.".
d. "Today the Fed took a step toward expanding aggregate demand, and this was done by raising the federal funds rate to 1.25 percent.".
a
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In a two-good economy, the price of video games is $40 and the price of energy drinks is $2. If the annual output of this economy is 100 video games and 500 drinks, the GDP is ________
A) $50,080 B) $25,200 C) $5,000 D) $20,200 E) none of the above
iTunes charges British customers 20 percent more than customers in France and Germany. Apple defended the price difference, saying that the "underlying economic model in each country has an impact on how we price our track downloads." An economist would say that Apple is engaged in:
A. monopolistic competition. B. price discrimination. C. collusion. D. reverse engineering.