Assume the economy is headed into a recession. Considering this, and recognizing that firms are slow to change the prices they charge for their products, are firms more or less likely to be able to pursue an effective markup pricing strategy in their
pursuit of positive economic profit? Why?
When the economy goes into a recession, many consumers' incomes decrease. To the extent that prices do not change, the effect of this is to cause the real price of many items to increase. A further increase in the price firms charge for their output would only exacerbate the price increase consumers are facing. Assuming firms were already pursuing an optimal markup pricing strategy, the new higher price would exceed the optimal level based upon the price elasticity of demand. This would in turn cause a larger decrease in quantity demanded, adversely affecting a firm's revenues and profits. In other words, there would be increased pressure on firms to reduce price and the markup they had been applying to different items.
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In the New Keynesian open economy model with a flexible exchange rate, an increase in anticipate future total factor productivity
A) has no effects. B) increases aggregate output. C) reduces aggregate consumption. D) causes an exchange rate appreciation.
In the economy of Talikastan in 2015, consumption was $700, exports were $200, government purchases were $300, imports were $150, and investment was $400 . What was Talikastan's GDP in 2015?
a. $1350 b. $1450 c. $1050 d. $1750
An increase in the minimum wage to $7 would cause ____ million people to lose their jobs.
The Federal Open Market Committee has responsibility for
A) advising the Treasury Department on monetary policy. B) printing money. C) issuing orders to buy or sell government securities for the Fed. D) appointing members to the Board of Governors of the Federal Reserve system.