The size of the MPC is assumed to be:
A. less than zero.
B. greater than one.
C. greater than zero but less than one.
D. two or more.
C. greater than zero but less than one.
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When a perfectly competitive market is in long-run equilibrium, each firm's price equals
a. both marginal cost and average total cost b. marginal cost, but exceeds average total cost c. marginal cost, but falls below average total cost d. average total cost, but exceeds marginal cost e. average total cost, but falls below marginal cost.
The interest rate in the federal funds market
a. is determined by the imposition of price controls imposed by the Fed. b. will tend to rise when the quantity of funds demanded by banks seeking additional reserves exceeds the quantity supplied by banks with excess reserves. c. will tend to fall if the Fed sells bonds and, thereby, reduces the reserves available to banks. d. is an interest rate that is largely unaffected by the policies of the Fed.
Within the framework of the AD/AS model, if consumers and investors become more pessimistic about the future direction of the economy, this will lead to
a. an increase in aggregate demand. b. a decrease in aggregate demand. c. an increase in long-run aggregate supply (LRAS shifts to the right). d. a reduction in the natural rate of unemployment.
The term "nominal income" refers to
A. Money income measured in current dollars. B. Real purchasing power. C. Money income adjusted for any change in the price level. D. Real purchasing power deflated for rising prices.