Because Prices Are Sticky in the Short-Run,when the Federal Reserve

question 26

Multiple Choice

Because prices are sticky in the short-run,when the Federal Reserve raises the federal funds rate

• A)nominal interest rates fall.
• B)real interest rates rise.
• C)inflation falls.
• D)real interest rates fall.

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Definitions:

Standard Markup Pricing

Adding a fixed percentage to the cost of all items in a specific product class.

Cost-Oriented

A pricing strategy where the price of a product or service is determined by adding a profit margin to its production cost.

Profit-Oriented

Focused on achieving financial gain or maximizing profits as the primary goal of business operations.

Cost-Plus-Fixed-Fee Pricing

A pricing strategy where the selling price is determined by adding a fixed fee to the cost of the product or service, covering both the cost and a guaranteed profit margin.