In the Short Run,an Increase in the Price Level Induces

question 33

Multiple Choice

In the short run,an increase in the price level induces firms to expand production because

• A)prices of inputs are held constant so the higher prices for their product implies that it is profitable to expand production.
• B)each firm must keep its production level up to the level of its rivals,and some firms will expand production as the price level increases.
• C)the higher prices allow the firm to hire more inputs by offering higher prices to the inputs,which increases productivity and profits.
• D)they can increase profits by increasing maintenance costs.

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Definitions:

Forward Rate

The expected interest rate agreed upon in a forward contract, applicable to a financial transaction that will occur in the future.

Spot Rate

The current market price at which a particular asset can be bought or sold for immediate delivery.

Japanese Yen

Japan's designated legal tender, marked by the symbol ¥, and a highly traded currency in the international forex market.

Risk-Free Rate

The assumed yield an investment would generate if it carried no risk, often indicated through government bond yields.