Contrary to behavior that would be required to eliminate output gaps, many firms in the economy:
A. intentionally set prices below equilibrium prices in order to create shortages.
B. adjust their prices only periodically.
C. only change the amount of output they produce in the long run, not in the short run.
D. have fully-flexible prices that change constantly.
Answer: B
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The Taylor rule specifies
a. a constant relationship between interest rates and output. b. a constant relationship between interest rates, output, and inflation. c. a flexible relationship between interest rates, output, and inflation. d. a fixed relationship between inflation and output. e. none of the above.
A telephone company that charges both a monthly fee plus a price per minute used are employing:
A. price discrimination based on observable customer characteristics. B. perfect price discrimination. C. a two-part tariff. D. the profit-maximizing rule.