A firm is a price taker if
A) seeks to maximize revenue rather than profit.
B) cannot influence the market price.
C) searches for the best price and then takes the highest profits possible.
D) buys inputs for firms.
Answer: B
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Loretta agrees to lend Ted $500,000 to buy computers for his consulting firm. They agree to a nominal interest rate of 8%. Both expect the inflation rate to be 2%
(a) Calculate the expected real interest rate. (b) If inflation turns out to be 3% over the life of the loan, what is the real interest rate? Who gains from unexpectedly high inflation, Loretta or Ted? (c) If inflation turns out to be 1% over the life of the loan, what is the real interest rate? Who gains from unexpectedly low inflation, Loretta or Ted?
Suppose both the demand for and supply of salsa increase (although not necessarily by the same amount). What can we conclude about changes in the price and quantity of salsa?
A. Both the price and quantity decrease. B. The quantity increases but the change in the price cannot be determined. C. Both the price and quantity increase. D. The price increases but the change in the quantity cannot be determined.
One out of every ____ people on this planet lives in China.
Fill in the blank(s) with the appropriate word(s).
If workers expect inflation, and negotiate wage increases that exactly match price increases, the result is a
A. horizontal aggregate supply curve at the level of potential GDP. B. vertical aggregate supply curve at the level of potential GDP. C. horizontal aggregate demand curve at the level of potential GDP. D. vertical aggregate demand curve at the level of potential GDP.