If inventories are being depleted, firms may respond by cutting prices.

Refer to Figure 26-10. In the figure above, suppose the economy is initially at point A. The movement of the economy to point B as shown in the graph illustrates the effect of which of the following policy actions by the Federal Reserve?

A) an open market purchase of Treasury bills B) a decrease in the required reserve ratio C) an open market sale of Treasury bills D) an increase in income taxes

Which of the following can expand the production possibilities frontier?

a. Improved patent laws b. Legal reforms that increase transaction costs c. Reductions in the length of patent protection d. Stringent tax laws for R&D companies e. The advent of a labor deepening technology