Your roommate is having trouble grasping how monetary policy works. Which of the following explanations could you use to correctly describe the mechanism by which the Fed can affect the economy through monetary policy? Increasing the money supply
A) lowers the interest rate, raises the value of the dollar, lowers the prices of exports, and raises net exports.
B) raises the interest rate and consumers decrease spending on durable goods.
C) causes people to spend more because they know prices will rise in the future.
D) lowers the interest rate, and firms increase investment spending.
Ques. 2What is the NAIRU?
A) the nongovernmental agency of inflationary rate unions
B) the new accrual index of real unemployment
C) the nonaccelerating inflation rate of unemployment
D) the natural accelerating inflation rate of unemployment
Ques. 3Which of the following is not a reason for firms to choose a salary system rather than a commission system to compensate their employees?
A) If workers are paid on the basis of the number of units of output they produce, they may become less concerned about quality.
B) Commission compensation systems are riskier for employees than a salary system, and many workers dislike risk.
C) Research has shown that most companies will find that a salary system will be more profitable than a commission system.
D) It is often difficult to attribute output to particular workers.
Ques. 4Using chain-weighted prices to calculate real GDP remedies the distortions causes by changes in relative prices over time.
Indicate whether the statement is true or false
Ques. 5Refer to Scenario 25-2. As a result of Kristy's deposit, checking account deposits in the banking system as a whole (including the original deposit) could eventually increase up to a maximum of
A) 8,000. B) 10,000. C) 50,000. D) 100,000.
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