Three main conditions are necessary for general equilibrium to hold in the market economy. The first requires that all consumers are in equilibrium meaning that all beneficial exchanges have been made between them. The second is that all inputs are employed in their best use meaning that costs are as low as possible for everything being produced. The third condition requires that
A. the production possibilities frontier move outward indicating economic growth.
B. absolute price levels do not change.
C. the distribution of income is done according to the societal values so that all the contract curves can be reached.
D. the right mix of goods is being produced.
Answer: D
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The coupon rate on newly issued bonds is usually ________ for bonds with favorable tax treatment, such as municipal bonds, and ________ for bonds that are very risky, such as junk bonds.
A. lower; lower B. lower; higher C. higher; lower D. higher; higher
Suppose for every dollar change in household wealth, consumption expenditures change by $0.05
If real household wealth declines by $45 billion, potential GDP is $120 billion, and the multiplier effect for the second year after an expenditure shock is 1.1, what is the total change in output relative to potential for the second year? A) -1.28% B) -1.73% C) -2.06% D) -5.78%
A bank's assets consist of $1,000,000 in total reserves, $2,100,000 in loans, and a building worth $1,200,000 . Its liabilities and capital consist of $3,000,000 in demand deposits and $1,300,000 in capital. If the required reserve ratio is 10 percent, what is the level of the bank's excess reserves? How much money could the excess reserves be used to create in the banking system as a result?
a. $700,000; $700,000 b. $700,000; $7,000,000 c. $300,000; $300,000 d. $300,000; $3,000,000
The primary goal of firms that operate in perfectly competitive markets is to
A. Maximize revenues B. Maximize profits C. Equate marginal revenue with average total cost. D. None of the above are correct