If people were perfectly rational, they would:
A. only care about real prices.
B. only care about nominal prices.
C. care about both real and nominal prices.
D. not care about prices at all.
Ans: A. only care about real prices.
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Monetary policy in the European Monetary Union is determined by
A) the Bundesbank. B) the European Union Senate. C) the European Central Bank. D) None of the above.
The required reserve ratio is 10 percent, and the potential change in demand deposits is $100 million. What are original excess reserves?
A) $10 million B) $100 million C) $1 million D) $1 billion
According to the interest-rate-based monetary policy transmission mechanism
A) an increase in money supply will increase interest rates. B) an increase in money supply will decrease interest rates. C) a decrease in money supply will decrease interest rates. D) a decrease in money supply will not change interest rates.
Monopolistically competitive firms can earn profits in the long run by:
A. price discriminating. B. continually innovating to differentiate their product. C. further minimizing their costs. D. monopolistically competitive firms only earn zero profits in the long run.