The last time the U.S. Post Office raised its prices for mail service critics of the rate increase argued that the Post Office's revenues would actually decline as a result of the price increase. It can be concluded that:
A) both groups believe demand is elastic, but for different reasons.
B) both groups believe demand is inelastic, but for different reasons.
C) the Post Office believes demand for mail service is elastic; opponents of the price increase believe demand is inelastic.
D) the Post Office believes demand for mail service is inelastic; opponents of the price increase believe demand is elastic.
D
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Changes in the federal funds rate:
A) change the long-run expected interest rates in the same direction. B) change the long-run expected interest rates in the opposite direction. C) can change the long-run expected interest rate either in any direction depending on the magnitude of the change in the federal funds rate. D) have no effect on the long-run expected interest rate.
All of the following statements are true about the real exchange rate, given by the relation = , EXCEPT
A) a greater change in P (domestic price) compared to a change in (foreign price) necessitates a rise in the nominal rate, , to keep the real rate unchanged. B) a pegged exchange rate system requires tight control of the money supply. C) there is a one-to-one correspondence between the real and nominal exchange rates. D) an expansionary monetary policy raises the real exchange rate. E) the real exchange rate would be the same as the nominal exchange rate only if the difference between domestic and foreign inflation rates is zero.