Aunt Rose owned a dress shop on 81st Street and Broadway in Manhattan, selling limited-edition dresses to wealthy clients. One day, her landlord tripled her rent. What effect would this have on her dress price in the short run, assuming she is following the rules of profit maximization?
What will be an ideal response?
Assuming she continues to operate, the higher rent will not affect dress prices in the short run. Rent is unrelated to the production cost of dresses; that is, it is a fixed cost. Only costs that enter into direct costs influence price. Fixed costs do not alter price or output of dresses in short-run profit maximization.
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If a person is laid off from a job, he is considered by the Bureau of Labor Statistics to be a
A) job leaver. B) reentrant. C) job loser. D) new entrant.
Which one of the following transactions would be included in GDP?
a. Ms. Kim pays $50 for a used picture frame at a neighborhood garage sale. b. Mr. Doe donates $500 to his town's junior college scholarship fund. c. Ms. Bartolini pays $500 to fix the front end of her car damaged in a recent accident. d. Ms. Smith pays $5,000 to purchase 100 shares of Microsoft stock.
Which of the following is not true of the demand deposit multiplier?
a. Its formula is 1/RRR. b. It represents the change in demand deposits generated by a change in reserves. c. It represents the change in demand deposits generated by a change in taxes. d. It is a way to determine the effect on money supply from a given Federal Reserve action. e. It ignores changes in the behavior of the public and the banks.
Fiscal policy involves changes in _____
a. government spending b. the amount lent by banks c. the interest rate d. the capital markets