"When the Fed makes an open market purchase of government securities, the quantity of money will eventually decrease by a fraction of the initial change in the monetary base." Is the previous statement correct or incorrect? Explain your answer
What will be an ideal response?
The statement is wrong on two counts. First, if the Fed makes an open market purchase of government securities, the quantity of money will increase rather than decrease. Second, the money multiplier points out that the change in the quantity of money will be greater than, not less than, the initial change in the monetary base.
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With a put option, the option holder:
A. can buy the asset but only on the date specified. B. can buy or sell the asset, it is their option. C. has the right to sell the asset. D. has the right to buy the asset.
Firm A has a higher marginal cost than firm B. They compete in a homogeneous product Bertrand duopoly. Which of the following results will NOT occur?
A. QA < QB B. Revenue of firm A < Revenue of firm B C. ProfitA < ProfitB D. PriceA < PriceB
Refer to Table 17.2. If the price of output is $2 per unit and the wage rate is $50, how many workers should be hired?
A. three workers B. four workers C. five workers D. six workers
The price of a large pepperoni pizza used to be $12, but this week the price rose to $18. With a budget of just $28, you can't afford as many pizzas at the higher price. This change in consumer behavior reflects the
A) real income effect. B) substitution effect. C) nominal income effect. D) concept of diminishing marginal utility.