According to the theory of "money neutrality" which of the following statements is likely to be true?
What will be an ideal response?
When the money supply is increased, nominal wage rates will rise.
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When a single firm has control over the market supply of a resource that is essential to the production of a good,
a. economies of scale are usually important. b. monopoly is frequently the result. c. diseconomies of scale are the usual cause. d. competition for the resource makes monopoly almost impossible
Use the following diagram to answer the next question.
Assume the economy is initially on aggregate demand AD2. The Fed should ________.
A. raise the discount rate B. buy bonds C. lower the prime rate D. increase the reserve requirement
If marginal cost becomes higher than price, what happens to a company?
(A) The company will lose money on each additional unit produced. (B) Diminishing marginal returns will shrink production. (C) Company specialization will lower the actual price charged. (D) The company will go out of business.
If autonomous spending decreases, then
A) the expenditure multiplier means that equilibrium expenditure increases by a larger amount. B) the expenditure multiplier means that equilibrium expenditure increases by a smaller amount. C) equilibrium expenditure does not change. D) the expenditure multiplier means that equilibrium expenditure decreases by a larger amount. E) equilibrium expenditure decreases by the same amount.