Expansionary monetary policy will decrease interest rates and decrease the velocity of money.
Answer the following statement true (T) or false (F)
True
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Kayla and Kevin are friends who go together to a used textbook seller who has two copies of the biology book that they both need for their class this semester. The cost to the seller of acquiring the books was $25 each and no other students will need this book. Kayla states that she is willing to pay $40 for the book, while Kevin says he is willing to pay $80. Which of the following describes the most likely conclusion to this scenario?
A. The seller will sell the books to both Kayla and Kevin for $80 each because Kevin's higher value exceeds Kayla's willingness to pay. B. The seller will sell the books to both Kayla and Kevin for $40 each because if they tried to charge Kevin a higher price, Kayla would engage in arbitrage. C. The seller will sell one book to Kayla for $40 and one book to Kevin for $80 because this market meets all three requirements for price discrimination. D. The seller will sell the books to both Kayla and Kevin for $25 each because that is how much the seller paid for the books.
If the Fed's policy reaction function equals r = .02 + p, where r is the real interest rate, p is the inflation rate. When the inflation rate is at the current target of 2%, then the real interest rate will be set at:
A. zero. B. 4% C. 2%. D. 6%.
Aggregate demand decreases and real output falls, but the price level remains the same. Which factor most likely contributes to downward price inflexibility?
A. The wealth effect. B. Business taxes. C. Fear of price wars. D. The multiplier effect.
If ________, then a profit-maximizing, monopolistically competitive firm earns positive economic profits.
A. P = ATC B. P < ATC C. P > ATC D. All of the above are possible.