Everything else held constant, when financial frictions increase, the real cost of borrowing ________ so that planned investment spending ________ at any given inflation rate

Refer to Figure 12-4. If the market price is $30, the firm's profit-maximizing output level is

A) 0. B) 130. C) 180. D) 240.

If rational expectations cause people's price expectations to be generally correct, active policy will influence the price level but not output

a. True b. False Indicate whether the statement is true or false