How does monetary policy work in the short run?
A. Fed open market purchases, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increase
B. Fed open market purchases, reserves/money supply decrease, disposable income increases, consumption increases, demand increases, price and output increase
C. Fed open market sales, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increase
D. Fed open market sales, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increases
E. Fed open market purchases, government spending increases, demand increases, price and output increase
Ans: A. Fed open market purchases, reserves/money supply increase, interest rates decrease, investment increases, demand increases, price and output increase
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La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly?
A) La Dila will lose all its market share. B) Swiss Pro will gain market share. C) La Dila will face the entire market demand. D) Swiss Pro will earn positive economic profits.
Refer to Table 9-1. The labor force participation rate for this simple economy equals
A) (1,100/20,000 ) × 100. B) (1,000/15,000 ) × 100. C) (1,100/15,000 ) × 100. D) (1,000/1,100 ) × 100.