If the money wage rate is constant and the price level increases, what happens to the real wage rate, firms' profits, and the aggregate quantity supplied?
What will be an ideal response?
The real wage rate falls. Because the price level has increased and money wage rates are constant while real wage rates are lower, firms' profits increase. As a result, the aggregate quantity of goods and services supplied increases.
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Which of the following policy tools is directly controlled by the Trading Desk at the Federal Reserve Bank of New York?
A) the spread between the discount rate and the federal funds rate B) the spread between the federal funds rate and the interest rate on banks' required reserves C) open market sales and purchases D) the required reserve ratio
Which of the following statements about an entrepreneur is true?
A) develops the vision for the firm and funds the producing unit B) sells his entrepreneurial services in the output market C) does not face personal risk D) purchases other factors of production in the output market