If Fed a Cares Only About Keeping the Price Level

question 1

Multiple Choice

If Fed A cares only about keeping the price level stable and Fed B cares only about keeping output at its natural level, then in response to an exogenous decrease in the velocity of money:

• A)both Fed A and Fed B should increase the quantity of money.
• B)Fed A should increase the quantity of money whereas Fed B should keep it stable.
• C)Fed A should keep the quantity of money stable whereas Fed B should increase it.
• D)both Fed A and Fed B should keep the quantity of money stable.

Appreciate the implications of short-run and long-run equilibriums on profits in monopolistic competition.

Understand the profitability analysis for firms in monopolistically competitive markets.

Identify the conditions for profit maximization in different competitive environments.

Recognize the role of information conveyed by advertising in economic decision-making.

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Definitions:

Government Agency

A permanent or semi-permanent organization in the machinery of government that is responsible for the oversight and administration of specific functions.

Negative Externality

A cost that affects a party who did not choose to incur that cost, typically resulting from economic activity by another party.

Marginal Social Cost

The total cost to society of producing an additional unit of a good or service, including both private costs and external effects.

External Social Cost

Costs of production or consumption that affect individuals not involved in the transaction, often unaccounted for by the market price.