If Firms Set Prices and Then Keep Them Fixed for a Period

question 94

Multiple Choice

If firms set prices and then keep them fixed for a period of time, their fixed prices imply that

• A)the aggregate price level is fixed and that aggregate demand determines the quantity of goods and services sold.
• B)prices are set by aggregate demand and supply.
• C)the aggregate price level is fixed and that aggregate supply determines the quantity of goods and services sold.
• D)the aggregate price level adjusts continuously.

Recognize the characteristics of Treasury Inflation-Protected Securities (TIPS).

Distinguish between the money market and other financial markets.

Know the function of federal funds and their role in banking operations.

Understand the issuance and purpose of T-bills and their significance in the government's financing.

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Definitions:

World War II

A global conflict lasting from 1939 to 1945, involving most of the world's nations including all of the great powers, eventually forming two opposing military alliances: the Allies and the Axis.

Social System

A complex set of human relationships interacting in many ways within a community or society.

Scarcity

The fundamental economic problem of having seemingly unlimited human wants in a world of limited resources.

Production Possibilities Frontiers

is a curve depicting all maximum output possibilities for two or more goods given a set of inputs (resources, labor, etc.), assuming all inputs are used efficiently.