According to the interest-rate-based transmission mechanism for monetary policy, a decrease in the money supply will cause the
A) interest rate to fall, causing planned real investment spending to rise and leading to an increase in aggregate demand.
B) interest rate to fall, causing planned real investment spending to rise and leading to a decrease in aggregate demand.
C) interest rate to rise, causing planned real investment spending to fall and leading to a decrease in aggregate demand.
D) interest rate to rise, causing planned real investment spending to rise and leading to a decrease in aggregate demand.
C
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If firms have different costs and market demand only supports the quantity the incumbent produces, then the incumbent's threat to use limit pricing
A) is credible. B) is not credible. C) would be illegal. D) is unable to be determined with the information given.
If the firms in a monopolistically competitive market are earning short-run economic profits, then
a. each existing firm will increase output in the long run as its marginal revenue curve shifts rightward b. each firm will experience an increase in the demand for its output in the long run c. each firm's profit will drop to normal in the long run as its demand curve shifts leftward due to entry of new firms d. barriers to entry will enable them to earn economic profits in the long run e. decreased demand for a key input will reduce that input's price in the long run and lower each firm's average total cost curve