With sticky prices increasing, the supply of money results in:
a. an increase in the nominal rate of interest.
b. an increase in the U.S. dollar exchange rate.
c. a decrease in the nominal rate of interest.
d. increased price and wage flexibility.
Ans: c. a decrease in the nominal rate of interest.
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If your marginal rate of substitution between two goods diminishes continuously as you give up one good for the other, that means the
A) price per unit of one good declines when you buy it in larger and larger quantities. B) two goods are perfect substitutes. C) two goods are perfect complements. D) two goods are neither perfect substitutes nor perfect complements.
Which of the following is true?
a. The production possibilities curve indicates that it will be impossible to expand total output with the passage of time. b. As long as resources are scarce, output cannot be increased. c. The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less. d. Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.