Suppose that nominal aggregate demand falls by 4 percent, and at the same time every marginal cost also falls by 4 percent. The importance of menu cost theory is that in this situation the price level ________, meaning that a recession ________
A) must fall by 4 percent as well, does not occur
B) must fall by 4 percent as well, must occur
C) still might not fall, may not occur
D) still might not fall, may occur
D
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The "store of value" function of money means it is the:
a. Asset individuals get for goods and services and then use later to purchase other goods and services. b. Barter value of a product for which a nation has a comparative advantage. c. The unit in terms of which people write contracts. d. Asset people can use to accumulate wealth. e. Unit in terms of which everything is valued and the basis for establishing relative prices between goods and services.
One symptom of the inefficiencies associated with monopolistic competition is industry wide excess capacity.
Answer the following statement true (T) or false (F)