Differentiate between an induced increase in consumption and an autonomous increase in consumption. How are they represented on a graph?
An induced increase in consumption is an increase in consumer spending that stems from an increase in consumer incomes. It is represented on a graph as a movement along a fixed consumption function.
An autonomous increase in consumption is an increase in consumer spending without any increase in consumer incomes. It is represented on a graph as a shift of the entire consumption function.
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By using open market operations, the Federal Reserve
A) adjusts the supply of reserves to keep the federal funds interest rate equal to its target. B) controls banks' demand for reserves, thereby keeping the federal funds rate equal to its target. C) adjusts the demand of reserves to keep bank rates in line with the federal funds rate target. D) adjusts the supply and demand of reserves to keep the federal funds interest rate equal to its target. E) None of the above answers is correct.
What is the payoff for each firm in this simultaneous game?
a. Both firms will earn 0 b. Firm A will earn 50 and firm B will earn -10 c. Firm A will earn -10 and firm B will earn 50 d. Both firms will earn 25