If an increase in prices decreases total revenue in the short run, what will it do to total revenue in the long run?
a. It will decrease total revenue in the long run.
b. It will increase total revenue in the long run.
c. It will leave total revenue unchanged in the long run.
d. Any of the above results are possible in the long run.
Question 2The discount rate's main significance is that:
a. changes in the rate are commonly viewed as a signal of the Fed's intentions with respect to monetary policy.
b. changes in the rate are a sign that monetary policy has swung strongly in a new direction.
c. it can be done quietly, without a lot of political debate or a public announcement.
d. a small change in the rate can make a huge change in the number of dollars that are in excess reserves in banks all over the country.
Question 3Wage contracts force businesses to adjust wages rather than employment in response to an unexpected change in aggregate demand.
a. True
b. False
Indicate whether the statement is true or false
Question 4If a cut in prices decreases total revenue in the short run, what will it do to total revenue in the long run?
a. It will decrease total revenue in the long run.
b. It will increase total revenue in the long run.
c. It will leave total revenue unchanged in the long run.
d. Any of the above results are possible in the long run.
Question 5Which is potentially the most powerful tool available to the Fed to control the supply of money?
a. open market operations
b. moral suasion
c. changes in reserve requirements
d. discount rate changes
Question 6If nominal wages are contractually fixed and cannot change in the short run, then an unexpected decline in the inflation rate will reduce business revenues and lower the unemployment rate.
a. True
b. False
Indicate whether the statement is true or false
Question 7If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, a decrease in price will ____ total revenue in the short run and ____ total revenue in the long run.
a. Increase; increase.
b. Increase; decrease.
c. Decrease; increase.
d. Decrease; decrease.
Question 8Which of the following would tend to increase unemployment in the short run?
a. commercial banks calling in loans to build up their excess reserves
b. an increase in reserve requirements
c. an increase in the discount rate
d. all of the above
Question 9When aggregate demand is lower than expected, inventories decline and the rate of unemployment falls.
a. True
b. False
Indicate whether the statement is true or false
Question 10If the short run elasticity of demand for widgets is 1.1 and the long run elasticity of demand for widgets is 3.6, an increase in price will ____ total revenue in the short run and ____ total revenue in the long run.
a. Increase; increase.
b. Increase; decrease.
c. Decrease; increase.
d. Decrease; decrease.
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