If a country chooses to establish fixed exchange rates and an independent monetary policy, it gives up the ability to have ________

If the CPI was 132.5 at the end of last year and 137.5 at the end of this year, the inflation rate over these two years was

A) 3.6 percent. B) 3.8 percent. C) 5.0 percent. D) None of the above answers is correct.

A student has just written on an exam that, in the long run, fixed cost will make the average total cost curve slope downward. Why will the professor mark it incorrect?

A. In the long run, firms have no fixed cost—all costs are variable. The shape of the long-run average total cost curve is determined by economies of scale. B. In the long run, fixed cost increases as firms build new plants and purchase new capital. This means that the average total cost curve will eventually slope upward. C. In the long run, fixed cost decreases as costs are spread out over a greater quantity of output. Declining fixed cost accounts for the downward-sloping average total cost curve. D. In the long run, there are no fixed costs, meaning the average total cost curve shifts down.