Author Question: A reduction of the discount rate by the Federal Reserve Banks has the direct effect of A) making ... (Read 66 times)

nevelica · **on:** Jun 29, 2018

A reduction of the discount rate by the Federal Reserve Banks has the direct effect of

A) making it less costly for commercial banks to borrow from the Fed.
B) making it more costly for the Treasury to finance deficits.
C) increasing commercial bank reserves.
D) increasing the stock of money.
E) doing all of the above.

Question 2

What criticism does the textbook level against the cost-plus-markup theory of price setting?

A) The theory does not agree with what businessmen say about price setting.
B) The theory does not account for vastly different percentage markups on different products.
C) The theory implies firms will sometimes want to set prices below average cost per unit.
D) The theory ignores sunk costs.
E) All of the above.