The formula of the equation of exchange is

Publishers charge much higher prices for a book in hardcover than for the same book in paper cover because

A) the demand for hardcover books is less elastic at the same price. B) the marginal cost of attaching hardcovers is very high. C) there are larger sunk costs in the production of hardcover editions. D) they have less bargaining power against bookstores in marketing paperback editions. E) they want to subsidize students.

If an economy is experiencing both full employment and price stability, within the Keynesian model, a major tax reduction probably would cause

a. an increase in unemployment in the near future. b. an increase in the general level of prices unless government expenditures are also reduced. c. an increase in the interest rate since individuals will reduce their savings in response to the tax cut. d. a decrease in consumption unless the expected budget deficit is financed by selling bonds to foreigners.