Assume that a central bank with a history of inflation announces that it is going to reduce money growth and inflation. According to the rational expectations model, the public will
a. immediately reduce their expected price level and inflation.
b. reduce their expected price level if this announcement is credible.
c. reduce their money and real wages if this announcement is credible.
d. immediately be open to reducing their money wage.
e. both b and c.
E
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If people expect the future exchange rate for dollars will be lower, then in the foreign exchange market the current
A) quantity demanded of dollars decreases. B) demand for dollars decreases. C) quantity demanded of dollars increases. D) demand for dollars increases. E) supply of dollars decreases.
In the foreign exchange market, the quantity U.S. dollars demanded is a function of:
A) the amount of imports and the level of capital outflows. B) the amount of exports and the level of capital outflows. C) the amount of exports and the level of capital inflows. D) none of the above.
The cross price elasticities among substitute goods will be extremely high when:
a. b and d. b. they are very similar to each other. c. people are consuming them frequently. d. people consume them in equal quantities. e. they are imperfect substitutes.
At its current level of production a profit-maximizing firm in a competitive market receives $12.50 for each unit it produces and faces an average total cost of $10 . At the market price of $12.50 per unit, the firm's marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm's current profit? What is likely to occur in this market and why?