One implication of coupling the rational expectations hypothesis with the assumption of flexible wages and prices is that
A. contractionary monetary policy will be effective in combating inflation.
B. only predictable policy actions by the Fed will have an effect on the real economy.
C. expansionary monetary policy will be effective in combating recessions.
D. only unpredictable policy actions by the Fed will have an effect on the real economy.
Answer: D
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Dan is the owner of a price-taking company that manufactures sporting goods. One particular facility Dan owns produces baseball bats and baseball gloves. His cost function for baseball bats is CB(QB, QG) = 100QB + QB2 + QBQG and the marginal cost is MCB = 100 + 2QB + QG, where QB is the output level for bats and QG is the output level for gloves. Dan's cost function for baseball gloves is CG(QB, QG) = 50QG + QG2 + QGQB, and the marginal cost is MCG = 50 + 2QG + QB. The price of a baseball bat is $240 and the price of a baseball glove is $150. What is the profit-maximizing sales quantity for baseball gloves?
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