The substitution effect suggests that, when consumers judge product quality by price, they will substitute high-priced products for low-priced products.

Which of the following is an instrument of monetary policy?

A) The interest rate on three-month Treasury bills B) The mortgage interest rate C) The discount rate D) The budget deficit

Suppose the current equilibrium real wage is $15 an hour. Which of the following is true?

a. A real wage above $15 an hour would lead to an excess demand for labor b. A real wage above $15 an hour would lead to an excess supply of labor c. The real wage must fall to prevent unemployment d. The real wage must rise to prevent unemployment e. A real wage below $15 an hour would lead to an excess supply of labor