What is the appropriate monetary policy response to a situation with deficient financial liquidity, when there is a liquidity trap?
A) an open market sale of government bonds
B) a decrease in the interest rate on reserves
C) an open market purchase of government bonds
D) an increase in the interest rate on reserves
D
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In a recession, which unemployment rate is the highest?
A) the U-1 unemployment rate B) the U-6 unemployment rate C) the U-2 unemployment rate D) the U-3 unemployment rate E) None of the above answers is correct because the highest unemployment rate changes from one recession to the next.
Assume a tomato farmer owns one truck and employs one driver. One Saturday a month he brings one truck load of tomatoes to the Farmer's Market
Over time he discovers that the demand for his tomatoes has increased dramatically as a result of increased marketing and advertising for the market. Explain both the short run and the long run impact on the equilibrium price and quantity of the farmer's tomatoes. Explain in terms of elasticity of supply.