The menu cost theory states that
A. prices depend only on the input costs.
B. economic agents quickly learn the likely responses of the Fed to changes in unemployment.
C. prices are not fully flexible because it is costly for firms to change prices every time there is a demand change.
D. the economy is characterized by perfect competition.
Answer: C
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An example of an external force affecting the business cycle is
a. an inventory accumulation. b. the multiplier effect. c. a change in business attitudes toward investment. d. a change in the discount rate by the Fed.
On January 1, 2010, a homeowner borrowed $5,000 for a term of six months to complete some home improvements, paying an annual interest rate of 8 percent. How much principal and interest will the homeowner pay back on July 1, 2010?
a. $2,500 b. $2,900 c. $5,200 d. $5,400
Supply refers to the amount of a product that a producer will offer in the market at some particular price.
Answer the following statement true (T) or false (F)
An income effect comes about because a price reduction of one product increases a consumer's real income.
Answer the following statement true (T) or false (F)