How does the presence of network effects in a two-sided market affects the pricing behavior in the market?
What will be an ideal response?
In a two-sided market, platform firms may set different prices for groups of end users with different network effects. Platform firms are intermediary firms that link together groups of producers and consumers as end users. In a transaction-based market for credit cards, for example, credit card issuers are platforms while retailers and credit card holders are end users. Credit card issuers may find network effects to be greater for retailers than for credit card holders. As such, retailers' willingness to accept credit cards responds to greater customer use more strongly than customers' willingness to use the cards responds to retailers' acceptance. If both retailers and card holders are equally responsive to changes in card fees, then credit card issuers would find it more profitable to charge lower card-usage fees to card holders than to retailers.
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Explain why high nominal interest rates in an economy does not necessarily mean real interest rates in the same economy are also high
What will be an ideal response?
If inflationary expectations are increasing, we would expect that the nominal interest rate would also be increasing, holding all else constant
Indicate whether the statement is true or false
The American Recovery and Reinvestment Act of 2009 provided ________
A) tax cuts of $288 million and a government spending increase of $499 million B) tax cuts of $288 million and a government spending increase of $499 billion C) tax cuts of $288 billion and a government spending increase of $499 billion D) tax cuts of $288 trillion and a government spending increase of $499 trillion
The economy is in macroequilibrium at the national income level where the aggregate expenditure curve intersects the 45-degree line
Indicate whether the statement is true or false