You find that your paycheck for the year is higher this year than last. Does that mean that your real income has increased? Explain carefully
Real income is nominal income adjusted for general increase in prices. If your paycheck is higher this year than last, your nominal income has increased. Whether your real income has increased or not depends on what has happened since last year to the level of prices of things you buy. If the percentage increase in prices is less than the percentage increase in nominal income, then real income has increased. If the percentage increase in prices is greater than the percentage increase in nominal income, the real income has decreases.
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For this question, assume that the Fed sets monetary policy according to the Taylor rule. Suppose current U.S. macroeconomic conditions are represented by the following: ? > ??* and u < un. Given this information, we would expect that the Fed will
A) implement a monetary contraction. B) implement a monetary expansion. C) maintain its current stance of monetary policy. D) more information is need to answer this question.
Suppose a consumer consumes two goods, X and Y. The relative price of the two goods equals the
a. marginal rate of substitution. b. rate at which the consumer will give up X to gain Y while maintaining the same level of utility. c. slope of the budget constraint. d. All of the above are correct.