Given a central bank's monetary policy reaction curve, if inflation increases by 1% why would policymakers likely have to increase the nominal interest rate by more than the increase in the expected rate of inflation?
What will be an ideal response?
The higher rate of inflation will have the policymakers wanting to raise the real interest rate. Since the real interest rate is the nominal interest rate less the rate of inflation, raising the nominal interest rate by the same amount that the rate of inflation has increased may not raise the expected real interest rate.
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The concept of diminishing marginal rate of substitution indicates that
A) as the consumption of good X increases, individuals are willing to give up an increasing amount of good Y in order to obtain one more unit of good X. B) as the consumption of good X increases, individuals are willing to give up a decreasing amount of good Y in order to obtain one more unit of good X. C) along an indifference curve, a consumer prefers the consumption combinations moving to the northwest along the curve. D) None of the above answers is correct.
Assume that a comparable worth law is passed that determines that kindergarten teachers and bricklayers have comparable jobs; therefore, workers in both of these occupations should be paid the same wages
Assume that prior to the law, bricklayers were paid a higher wage than kindergarten teachers. Which of the following is the most likely result of the comparable worth law? A) There will be surplus in the market for bricklayers and a shortage in the market for kindergarten teachers. B) Some former bricklayers will become kindergarten teachers and some former kindergarten teachers will become bricklayers. C) The equilibrium wage will be the same for kindergarten teachers and bricklayers. D) There will be a shortage in the market for bricklayers and a surplus in the market for kindergarten teachers.