Can the Fed control both the interest rate and the size of the money supply? Explain
The Fed faces a trade-off: It can choose an interest rate target or a money supply target, but not both. If it
decides to target the money supply, it must allow the interest rate to move with fluctuations in money
demand. If it decides to target the interest rate, then it must adjust the money supply in response to changes
in money demand.
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When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will
A) increase. B) decrease. C) not change. D) become vertical. E) become the same as the individual producers' supplies.
The above table shows the short-run production function for Albert's Pretzels. The marginal product of labor equals the average product of labor
A) for all levels of labor. B) at none of the levels of labor. C) only for the first worker. D) only for the fifth worker.