Suppose the Fed has a target inflation rate of 3%, the Fed always hits its target, and the inflation rate has been 3% for several years
Furthermore, assume Amazon sets the price of its Kindle Fire at $140 in 2012 and wants to keep the real price of the Kindle constant in order to maximize profits. Now suppose that the Fed announces on January 1, 2013 that it will decrease its target rate for inflation to 1%. If Amazon has adaptive expectations, it will set its price for the Kindle in 2013 at A) $137.20.
B) $140.00.
C) $141.40.
D) $144.20.
D
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Jim is haggling with a car dealer, along with another customer, over the sale price of a used car. When he entered the store, the storekeeper was already haggling with the other customer. His bargaining position would improve if
a. The other customer leaves b. He receives an offer from a competing car dealer c. He can make it clear that he will leave if his offer isn't accepted d. All of the above
Which of the following factors would be most likely to encourage capital formation in a less-developed nation?
a. high and variable rates of inflation b. tariffs and quotas that restrict international trade c. a legal system that provides for secure property rights and even-handed enforcement of contracts d. high marginal tax rates
Advertising can impede economic efficiency when it:
A. increases entry barriers. B. reduces brand loyalty. C. enables firms to achieve substantial economies of scale. D. increases consumer awareness of substitute products.
Asymmetric information in a market transaction occurs when there is unequal knowledge possessed by the:
A. Buyer and the government B. Seller and the government C. Taxpayer and the government D. Buyer and the seller