A perfectly competitive firm is a price

You are the chairperson of the Board of Governors of the Federal Reserve. You believe in a Keynesian model of the economy, and your goal is to keep the economy at the full-employment level of output

How would you respond (tightening or easing policy) in each of the following cases? (a) Government purchases increase (b) Corporate tax rates increase (c) Expected inflation increases (d) There's a beneficial oil price shock (and the LM curve shifts more to the right than the FE line)

Suppose the marginal product of labor equals 1/L. If the wage is $1 per unit of labor, what is the short-run effect on the firm's labor demand if the price of output were to double?

A) The firm will demand half as much labor. B) The firm will demand twice as much labor. C) The firm will demand the same quantity of labor. D) There is not enough information to determine.