The economy suffered a mild recession in 2001. Despite the recession, home sales and durable goods sales remained high. Which of the following is a plausible explanation?
A) The Fed's pursuit of contractionary policy stimulated these markets.
B) The Fed caused a reduction in the federal funds rate to its lowest level in 40 years.
C) Home building and consumer durable purchases are always high during a recession.
D) Rising inflation encouraged many to invest in the real estate market.
B
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Suppose there are only two firms in an economy: Rolling Rawhide produces rawhide and sells it to Chewy Chomp, Inc, which uses the rawhide to produce and sell dog chews. With each $1 worth of rawhide that it buys from Rolling Rawhide, Chewy Chomp, Inc produces a dog chew and sells it for $2.50 . Neither firm had any inventory at the beginning of 2014 . During that year, Rolling Rawhide produced
enough rawhide for 2000 dog chews. Chewy Chomp, Inc bought 90% of that rawhide for $1800 and promised to buy the remaining 10% for $200 in 2015 . Chewy Chomp, Inc produced 1800 dog chews during 2014 and sold each one during that year for $2.50 . What was the economy's GDP for 2014? a. $3,800 b. $4,500 c. $4,700 d. $5,000
In the long run, a monopolistically competitive firm will set price:
A. at the intersection of the marginal cost and demand curves. B. at the intersection of the average total cost and demand curves. C. higher than the competitive level, but lower than the monopoly price. D. higher than the marginal cost, but lower than average total cost.