Assignment 9 (Ch. 16 & 17, LS 12 & 13)

Question	Answer
Does the fed make a profit?	no
find real rate of interest	plug in potential output as y and solve for r
national saving equals planned investment when	the economy is at potential
a. Competition among brokers forces down the commission charge for selling holdings of bonds or stocks.	Nominal interest rates will decrease and demand for money will decrease
Grocery stores begin to accept credit cards in payment.	Nominal interest rates will decrease.
c. Financial investors become concerned about increasing riskiness of stocks.	Nominal interest rates will increase and demand for money will increase
a reduction in taxes shifts aggregate demand	to the right
when the fed raises its target rate, in the short run	output and inflation rise
when the fed raises its target rate, in the long run	inflation rises and output stays the same
in a recessionary gap, not changing target inflation rate causes ____ in short run	recessionary gap with higher unemployment
in a recessionary gap, not changing target inflation rate causes ____ in long run	potential output at a lower price level
demand shocks shift the	demand curve to the left
inflation inertia	inflation tends to remain roughly constant

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	Created by casedlynch over 10 years ago