In a monopolistically competitive market with Dixit-Stiglitz preferences, equilibrium price falls as the goods in the differentiated product market become more substitutable.
Answer the following statement true (T) or false (F)
True
Rationale: Price is equal to marginal cost divided by (negative) rho -- with goods becoming more substitutable as rho approaches -1.
Economics
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Internal balance describes
A) equilibrium in the goods market. B) a desired level of trade or capital flows. C) where the IS and BP curve intersect. D) a domestic rate of growth consistent with a low unemployment rate.
Economics
Consider an adverse supply shock in the RBC model. The central bank knows that the pre-shock level of output
A) can be maintained only by reducing the money supply. B) can be maintained only by holding constant the money supply, C) can be maintained only by increasing the money supply. D) cannot be maintained by any monetary policy.
Economics