Zero lower bound on the federal funds rate

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Reference no: EM138335

Q1. In July, 2012 U.S. gasoline had a nominal price of $3.49 and in July of 1992 it was $1.14.

Determine the real price of gasoline for both periods in terms of values in the base period of the CPI.

Q2. Suppose at the going wage rate of $20 per hour, firms can hire as many hours of janitorial services as it desires. If any firm tries to lower the wage rate to $19, it will not be able to hire any janitor. What does this indicate about the supply curve for janitorial services?

Q3. Suppose the equation for the LM curve is Y= 13,500r. Use this equation to explain the level of income at which there is a zero lower bound on the federal funds rate, the interest rate that the Fed controls.

Reference no: EM138335

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