The monetary transmission mechanism that links monetary policy to GDP through real interest rates and investment spending is called the
A) traditional interest-rate channel.
B) Tobins' q theory.
C) wealth effects.
D) cash flow channel.
A
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Peter is looking at a graph that shows the relation between inflation and unemployment. It measures the rate of inflation along the y-axis and the rate of unemployment along the x-axis. Peter believes that the graph shown to him is a short-run Phillips curve. Which of the following will strengthen his belief?
a. The points marked on the curves are (6, 4), (6, 3), and (6, 2). b. The points marked on the curves are (5, 4), (6, 4), and (7, 4). c. The points marked on the curves are (5, 4), (6, 3), and (7, 2). d. The points marked on the curves are (5, 4), (6, 5), and (7, 6).
Is the Taylor rule the specific formula followed by the FOMC? Explain.
What will be an ideal response?