1 How are prices important? Prices influence all trade-offs made by consumers, workers and firms For example, when prices of a goods increase, consumers tend to buy substitutes even they don’t prefer them Workers choose employment depending partly on salaries paid to them And, a firm’s decisions such as buying more machinery or employing more workers depend partly on prices of those machines or salaries paid to those workers Why is it said that micro and macro are interdependent and complement one another? Because there are many overlapping issues between the two fields For ex, increased inflation would cause the price of raw materials to increase for companies and in turn affect the end product price charges to the public Why Government shoudn’t print money to finance decifit? Because, printing money makes money supply increases so the prices of goods and services increases It causes a inflation What is primary tools of monetary policy? This is open market operation Because changes in discount rate and reserve requirement are not used in day to day fed operations They are used mainly for major changes So the fed uses open market operation Do shareholders of a corporation receive fixed dollar amounts at regular interval? No, they don’t Because it depends on the number of their shares in the company, and firm’s net come and firm’s asset