Describe the difference between the simple quantity theory of money and the equation of exchange
The equation of exchange is an identity which states that the money supply multiplied by velocity must equal the price level times Real GDP. It is not a theory of the macroeconomy until assumptions are made about the variables in the equation. In the simple quantity theory of money, velocity (V) and Real GDP (Q) are assumed to be constant. With V and Q constant, it follows that changes in the money supply cause strictly proportional changes in the price level.
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Suppose two companies, Macrosoft and Apricot, and considering whether to develop a new product, a touch-screen t-shirt. The payoffs to each of developing a touch-screen t-shirt depend upon the actions of the other, as shown in the payoff matrix below (the payoffs are given in millions of dollars). If Macrosoft and Apricot make their decision at the same time, then which of the following statements is correct?
A. The game has more than one Nash equilibrium. B. The game does not have a Nash equilibrium. C. The only Nash equilibrium is that both develop a touch-screen t-shirt. D. The only Nash equilibrium is that neither develops a touch-screen t-shirt.
To understand why someone cannot get a job, it helps to know the three types of unemployment. List the three types of unemployment and explain what causes each type
What advice for finding a job would be appropriate for someone in each type of unemployment?
A player can choose among three strategies: T, M, and B. Nevertheless, strategy B is dominated by strategy T. This means that
A) strategy T is always played. B) strategy B is never played. C) strategy B will be part of a Nash equilibrium. D) strategy M is never played.
Which of the following situations can lead to a winner's curse?
a. A bid which is won by multiple bidders but fails to cover the expectations of the seller. b. A win which makes a player over-enthusiastic about further gambles. c. An overoptimistic bid which helps the bidder to win but fails to cover his costs. d. A win which makes the player risk-averse toward future gambles.