From the end of 2005 to the end of 2006, the United States ran a deficit of about $309 billion. The debt at the start of this period was about $4,592 billion. Which of the following combinations of inflation and real GDP growth would have allowed the government to run this deficit while keeping the ratio of real GDP to the debt about the same?
a. about 3% inflation and about 2.2% real GDP growth
b. about 3% inflation and about 3.2% real GDP growth
c. about 3.4% inflation and about 3.3% real GDP growth
d. about 3.4% inflation and about 4% real GDP growth
c
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Supply is elastic if
A) a 1 percent change in price leads to a larger percentage change in quantity supplied. B) a 1 percent change in price leads to a smaller percentage change in quantity supplied. C) the slope of the supply curve is positive. D) the good in question is a normal good.
Suppose the equilibrium real federal funds rate is 5 percent, the target rate of inflation is 3 percent, the current inflation rate is 5 percent, and real GDP is 4 percent above potential real GDP
If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals A) 1 percent. B) 9 percent. C) 13 percent. D) 17 percent.