An indirect effect of an increase in the price level works through
A. changes in trade balances as domestic goods become more expensive, causing interest rates to move in the opposite direction from the change in the exchange rate.
B. people substituting out of domestic goods and into foreign goods as exchange rates rise.
C. interest rates as people borrow to maintain their money balances, bidding up interest rates and reducing total planned real expenditures.
D. interest rates as people save more as the higher prices make their money balances less attractive.
Answer: C
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It has been argued that a monopolistically competitive industry involves "waste" because
A) there is too much product differentiation making shelves too crowded. B) they end up producing to the right of the minimum of the average total cost curve and the price is below the marginal cost. C) the firms do not equate marginal cost to marginal revenue to find the profit maximizing price and output. D) the firms do not produce at the minimum of the average total cost curve and price is above marginal cost.
An economy in which output has decreased and prices have decreased would suggest a:
A. decrease in short-run aggregate supply. B. increase in aggregate demand. C. increase in short-run aggregate supply. D. decrease in aggregate demand.
If a good sells for $10 domestically and the same good sells for $7 abroad, then this firm is engaging in
A) marginal cost selling. B) price discrimination. C) price differentiation. D) dumping.
Political freedom can sometimes moderately reduce economic growth because
A. campaign contributions lead to reductions in investment. B. special interest groups may gain at the expense of the overall economy. C. most jobs are in unions that are politically connected. D. all of these.