Which of the following types of firm most closely fits the description of a competitive firm?
a. new car manufacturers: General Motors, Ford, Chrysler, Toyota, etc.
b. local grocery stores
c. corn farmers
d. the local electric utility
c. corn farmers
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When the LM curve is vertical,
A) fiscal policy has no impact on equilibrium income. B) fiscal policy has no impact on the equilibrium interest rate. C) the economy is at full employment. D) monetary policy has no impact on equilibrium income.
Refer to Figure 12.1. Suppose the economy is initially at full employment with real GDP equal to potential GDP, and the expected inflation rate equal to the actual inflation rate
If the economy then experiences a negative demand shock, and the Fed responds to the results of the demand shock with an appropriate monetary policy, the Fed response will A) push the economy further down the Phillips curve, lowering the inflation rate further. B) push the economy back up the Phillips curve, raising the inflation rate towards its full-employment level. C) push the economy back down the Phillips curve, lowering the inflation rate towards its full-employment level. D) push the economy further up the Phillips curve, lowering the inflation rate further.
An airline knows that business travelers have more inelastic demand for travel than vacationers. That is, business travelers are often willing to pay more for airline tickets than vacationers. The airline also knows that business travelers do not like to travel over weekends. When customers request airline tickets that do not involve travel over a weekend, the airline determines that a traveler
is likely a business traveler and charges a higher price. This is an example of a. moral hazard. b. signaling. c. screening. d. adverse selection.
Natural disasters like severe earthquakes are devastating to the economy as well as to the individuals harmed due to
A. demand shocks. B. demand-pull inflation. C. demand-pull deflation. D. supply shocks.