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1. Suppose the economy is thought to be 1 percent below potential (i.e., the output gap is −1 percent), when potential output grows 4 percent per year. Suppose the Fed is following the Taylor rule, with an inflation rate of 4 percent over the past year. The equilibrium real federal funds rate is 3 percent and the weights on the output gap and inflation gap are 0.5 each. The inflation target is 1 percent. What should the federal funds rate be?
A) 4 percent
B) 6 percent
C) 8 percent
D) 12 percent
2. If the potential output of an economy is worth $440 billion and the actual output during a particular year was $435 billion, the output gap is?
A) -1.14 percent
B) 2.2 percent
C) -5 percent
D) 1.1 percent
Consider an antique auction where bidders have independent private values. There are two bidders, each of whom perceives that valuations are uniformly distributed between $100 and $1,000. One of the bidders is Sue, who knows her own valuation is $200..
1. you are a commuter student at a local university. because of the steep rise in gasoline prices your parents decide
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the demand for Internet advertising was declining at the similar time which the number of Internet sites accepting advertising was increasing
It is noted in the text that the infant industry argument is more frequently used in developing countries than in developed countries. Why might this be the case? Does this necessarily have to be the case?
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