In the long run, the price level adjusts
A) to achieve money market equilibrium.
B) so that the inflation rate equals the growth rate of real GDP.
C) so that the inflation rate equals zero.
D) so that the inflation rate is moderate.
E) so that the real interest rate equals the nominal interest rate.
A
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The FOMC is concerned about inflation and has ________ the federal funds rate. Due to substitution effects, other ________ interest rates will ________ almost immediately
A) increased; short-term; increase B) decreased; short-term; decrease C) increased; long-term; increase D) decreased; long-term; decrease E) increased; short-term; decrease
Assume that an individual has to decide between a two-day vacation and a three-day vacation to the same place. If he uses optimization in differences, he will:
A) only think about the net benefits of the extra day. B) compare the total net benefits of both alternatives. C) choose the three-day vacation only if the costs incurred on the third day exceed the benefits he receives. D) spend more time to come to a decision than if he would have used optimization in levels.
The target price approach to the farm problem distorted the market less than the support price approach because the target price
a. does not allow the market to clear, whereas the support price does b. increases farm incomes by creating a shortage, whereas the support price creates a surplus c. permits the market to clear, whereas the support price does not d. is set equal to the equilibrium price e. is independent of market conditions and thus gives farmers a steady income
A firm sells in a competitive market in which price is $10 . Its marginal cost is 2 + .5Q. Determine the profit-maximizing level of output