The key disadvantage of the kinked-demand model is that it:
A) explains why firms may collude, but it does not explain how they interact.
B) does not explain why prices may be rigid in an oligopoly.
C) requires the assumptions of perfect competition.
D) only holds under price leadership.
B
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An increase in the nominal interest rate leads to
A) a movement upward along the demand for money curve. B) a rightward shift in the demand for money curve. C) neither a shift in nor a movement along the demand for money curve. D) a movement downward along the demand for money curve. E) a leftward shift in the demand for money curve.
The initial impact of the Fed's open market sale of government securities to banks is
A) an increase in the quantity of money by some multiple of the dollar volume of the sale. B) an increase in bank deposits at the Fed. C) a decrease in the quantity of money by some multiple of the dollar volume of the sale. D) a decrease of the banking system's reserve deposits at the Fed.