In the Keynesian model, suppose the Fed sets a target for the real interest rate. If the IS curve shifts down and to the left, and the Fed wants to keep output unchanged in the short run and the price level unchanged in the long run, what should the Fed do? Use the LR curve to formulate your answer.
What will be an ideal response?
Reduce the real interest rate by shifting the LR curve down.
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Phillip is going for a job interview. He will have a higher bargaining power if:
A) he is the only applicant. B) there are several applicants. C) no other company has a job opening. D) he is a college freshman.
The figure above shows the market for milk. If one firm owns all the milk outlets in the city and sells 100 gallons of milk
A) the market is efficient because the marginal social benefit from the last gallon of milk exceeds its marginal social cost. B) the market is efficient because the total social benefit from milk exceed the total social cost. C) there is a deadweight loss because the marginal social benefit from the last gallon of milk exceeds its marginal social cost. D) there is a deadweight loss because the marginal social cost of the last gallon of milk exceeds its marginal social benefit.
The Business Cycle Dating Committee defines a recession as
A) a significant decline in activity visible in industrial production, employment, real income, and wholesale/retail trade lasting more than a few months. B) two consecutive quarters of declining real GDP. C) a significant decline in inflation and unemployment lasting more than a few months. D) two consecutive quarters of declining nominal GDP.
Build-Right Concrete Products produces specialty cement used in construction of highways. Build-Right is a price-setting firm and estimates the demand for its cement by the State Highway Department using a demand function in the nonlinear form:Q = aPbMc
where Q = yards of cement demanded monthly, P = the price of Build-Right's cement per yard, M = state tax revenues per capita, and PR = the price of asphalt per yard. The manager at Build-Right transforms the nonlinear relation into a linear relation for estimation. The estimation results are presented below: 
height="198" width="577" />Given the above, if the price of asphalt (PR) decreases 20%, the estimated quantity of cement demanded will: A. increase 1.2% B. increase 12% C. decrease 1.2%. D. decrease 12%. E. increase 6%