In a game, a Nash equilibrium is reached only if the players: ...

[sarasara]

In a game, a Nash equilibrium is reached only if the players:
 
  A) understand the game and the payoffs associated with each strategy.
  B) follow a mixed strategy.
  C) use backward induction method to develop their strategies.
  D) have no best response for the choices made by other players.

Question 2

How does an increase in the price level affect the aggregate quantity of goods and services demanded?
 
  What will be an ideal response?

[Beatricemm]

Answer to Question 1

A

Answer to Question 2

An increase in the price level decreases the aggregate quantity of goods and services demanded for three reasons. First, it decreases the buying power of money. As a result, people decrease their demand for goods and services. Second, it raises the real interest rate. The real interest rate rises because an increase in the price level increases the demand for money, which raises the nominal interest rate, which, in the short run, raises the real interest rate. When the real interest rate rises, people and businesses delay plans for investment and purchases of big-ticket items. Finally, an increase in the price level makes domestically produced goods and services more expensive relative to foreign-produced goods and services. As a result, people and firms buy more foreign produced and fewer domestically produced goods and services, which decreases the quantity demanded of domestically produced goods and services.