All the following are assumptions of the classical model EXCEPT
A. wages and prices are flexible.
B. buyers and sellers react to nominal money prices rather than to relative prices.
C. people are motivated by self-interest.
D. pure competition exists.
Answer: B
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Monetary policy decisions, such as the target growth rate in the money supply or the target level for interest rates, are set by the
a. president and congress. b. Federal Reserve Board of Governors. c. Shadow Open Market Committee. d. presidents of the Federal Reserve banks. e. Federal Open Market Committee (FOMC).
If the government passed a law designating sea shells as money, sea shells
a. would not be legal tender b. would not function as money because they would be unable to serve as a unit of account c. would not function as money because they would be unable to serve as a means of payment d. would not function as money because they would be unable to serve as a store of wealth e. would function as money as long as they were accepted in exchange for goods and services
The long-run equilibrium in a monopolistically competitive market is similar to the long-run equilibrium in a perfectly competitive market in that in both markets, firms
A) produce at the minimum point of their average total cost curves. B) produce where price equals marginal cost. C) break even. D) produce where price equals marginal revenue.
An example of a "missing" market would be:
A. the market to buy and sell children for adoption. B. the market to buy and sell a kidney. C. the market to buy and sell dates for a Friday night. D. All of these markets are missing.