Assume the economy is initially in equilibrium where potential GDP equals real GDP
If the expected inflation rate, the term structure effect, and the default-risk premium are constant and the Fed wants to lower the inflation rate, the Fed could ________ the target short-term nominal interest rate, which will result in real GDP being ________ potential GDP. A) increase; greater than
B) increase; less than
C) decrease; greater than
D) decrease; less than
B
You might also like to view...
According to the AK growth model, taxes on corporate income and capital gains ________ the incentive for firms to accumulate capital and ________ the steady-state growth rate
A) increase; increase B) reduce; reduce C) increase; do not change D) reduce; do not change
Identify the correct statement from the following
a. Modern telecommunications turned cities like Omaha and Bangalore into new resources for the world. b. Being only 10 hours away from most of the industrial world enabled Anchorage, Alaska to become the busiest cargo airport in the world. c. Call centers in the U.S. set up shop in small towns to prevent large-scale migration to bigger cities. d. Unless a city is in an advantageous location for conducting any form of business, it is difficult to boost its economy in today's world.