Which of the following is false about potential output?
A. It is the level of output an economy can achieve when labor is employed at its natural level.
B. It is the long run output level that guarantees price stability.
C. If a country is producing its potential output, then it is producing at a point on its production possibilities frontier.
D. It is also called the natural level of real GDP.
Ans: B. It is the long run output level that guarantees price stability.
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Tatiana is waiting to be recalled to a job from which she was laid off. Ivan was fired but has not looked for work during the last two months. Who does the Bureau of Labor Statistics count as "unemployed"?
a. Tatiana but not Ivan b. Ivan but not Tatiana c. both Ivan and Tatiana d. neither Ivan nor Tatiana
Reserves decrease if the Federal Reserve
a. raises the discount rate or auctions more credit. b. raises the discount rate but not if it auctions more credit. c. lowers the discount rate or auctions more credit. d. lowers the discount rate but not if it auctions more credit.