Distinguish the terms price ceiling and price floor.
What will be an ideal response?
A price ceiling is a government-imposed limit on how high a price can be charged on a product. A price floor is a government imposed limit on how low a price can be charged for a product.
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Why is there a price markup over marginal cost in monopolistic competition?
What will be an ideal response?
If firms are more optimistic that future profits will rise and remain strong for the next few years, then
A) investment spending will remain unaffected. B) investment spending will rise and then fall. C) investment spending will rise. D) investment spending will fall.
Why did fewer state banks choose to become or remain members of the Federal Reserve System during the 1960s and 1970s?
A) Nominal interest rates rose. B) The required reserve ratio rose. C) The discount rate rose. D) Open market operations declined.
An "open market operation" is said to occur when the Fed
A) arranges for the merger of two banks. B) changes the interest rate at which it lends reserves. C) transfers reserves between banks. D) buys or sells government securities.