Longer time frames generally result in less elastic supply

Suppose that rising productivity increases potential output in each period by 4%. What kind of monetary policy would be needed to maintain a zero rate of inflation at full employment?

A. It should keep money supply constant. B. It should increase money supply by 4% in the first period and thereafter, hold money supply constant. C. It should increase money supply by 4% per period. D. It should decrease money supply by 4% each period.

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

A) The firm's profits will increase. B) The firm's revenue will increase. C) The firm will not sell any output. D) The firm will sell more output than its competitors.