Author Question: A strategy called limit pricing sets the price A) below the competitive level. B) at the ... (Read 88 times)

Zoey63294 · **on:** Jun 29, 2018

A strategy called limit pricing sets the price

A) below the competitive level.
B) at the monopoly level.
C) at the lowest level that inflicts a loss on the entrant.
D) at the highest level that inflicts a loss on the entrant.

Question 2

When the Fed buys securities from a bank, the quantity of money eventually decreases by a fraction of the initial change in the monetary base. Is the previous statement correct or incorrect? Explain your answer.

What will be an ideal response?

Bigfoot1984 · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

The statement is wrong on two counts. First, if the Fed buys securities from a bank, the quantity of money increases rather than decreases. Second, the money multiplier points out that the change in the quantity of money is ultimately greater than, not less than, the initial change in the monetary base.