Refer to Figure 12-11. If this is a constant-cost industry, what is the market price in the long-run equilibrium?

Banks have attempted to maintain adequate profit levels by

A) making fewer riskier loans, such as commercial real estate loans. B) pursuing new off-balance-sheet activities. C) increasing reserve deposits at the Fed. D) decreasing capital accounts.

Which statement is a good argument in support of policy activism?

A) Policy lags are generally longer than the time it takes the self-correcting mechanism to work. B) Activist policies help to ensure stability of the real interest rate. C) Well-considered policies can assist the economy's self-correcting mechanism, thus reducing the variability of inflation and unemployment. D) all of the above E) none of the above