As the Fed maintained interest rates at near zero during 2008-2012,
a. the economy recovered and the unemployment rate fell to normal levels.
b. households and businesses held larger money balances and the velocity of money fell substantially.
c. stock prices declined during 2010-2012, causing the economy to remain weak.
d. the earnings senior citizens derived from saving deposits and other forms of savings rose substantially, leading to higher incomes and a strong increase in aggregate demand.
B
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A change in which of the following variables will have no direct effect on domestic demand?
A) domestic income B) foreign income C) government spending D) the interest rate (r) E) none of the above
Before digital photography, most film processing companies had a policy of printing every picture on a roll of film and allowing customers to request a refund for pictures that were not clearly developed. The companies did this knowing that most
customers did not ask for refunds. This was an example of consumers A) failing to ignore sunk costs. B) being overly optimistic about their future behavior. C) not taking nonmonetary opportunity costs into account. D) not making themselves aware of the policy regarding refunds.