What are the two assumptions made in the nonactivist constant-money-growth-rate rule? Describe the alternative rule known as the predetermined-money-growth-rate rule and explain why some nonactivists prefer this rule
The two assumptions made in the constant-money-growth-rate rule are that velocity is constant and that the money supply is defined correctly. Critics argue that it is not yet clear which definition of money (M1, M2, etc) is the proper one to use and therefore which money supply growth rate ought to be fixed. They also state that there have been periods when velocity has not been constant. Given these criticisms, some nonactivists prefer the predetermined-money-growth-rate rule which states that the annual growth rate in the money supply will be equal to the average annual growth rate in Real GDP minus the growth rate in velocity. With this rule, the growth rate of the money supply is not fixed but it is predetermined based on the growth rates of Real GDP and velocity.
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Assume that we only have data on total cost when output is equal to zero and no other cost information at our disposal. How could we possibly know what the fixed costs are for the firm?
What will be an ideal response?
If Ep is 3500 and Y is 3000, then companies will
A) reduce orders and production by 500. B) increase orders and production by 500. C) wait for final sales to increase but continue to produce at existing level in the future. D) wait for final sales to decrease but reduce the level of production in the future.
_______________ —a term referring to the government practice of enacting laws to regulate prices instead of letting market forces determine prices.
a. Price ceiling b. Price floor c. Price control d. Subsidies
Assume that Canadian firms can produce one automobile or 1,000 calculators per day, and that U.S. firms can produce three automobiles or 6,000 calculators per day. The terms of trade should be between
a. 1,000 and 2,000 calculators per automobile, and the U.S. should produce both calculators and automobiles b. 1,000 and 6,000 calculators per automobile, and the U.S. should produce automobiles c. 1,000 and 6,000 calculators per automobile, and the U.S. should produce calculators d. 1,000 and 2,000 calculators per automobile, and the U.S. should produce automobiles e. 1,000 and 2,000 calculators per automobile, and Canada should produce automobiles