Market failure is said to occur whenever:
A. private markets do not allocate resources in the most economically desirable way.
B. prices rise.
C. some consumers who want a good do not obtain it because the price is higher than they
are willing to pay.
D. government intervenes in the functioning of private markets.
Answer: A
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A new technology is discovered which results in all new cars producing 50 percent less pollution. Which of the following is true?
A) Real GDP increases because the air is cleaner, but nominal GDP does not change since air is free. B) GDP will increase to reflect the fact that the air we breathe is cleaner. C) GDP will increase if there is an increase in the production cost and price of the car. D) GDP increases anytime pollution is reduced. E) GDP will decrease.
If the Fed buys a U.S. government bond from a member of the public,
a. the banking system has more reserves and the money supply tends to grow. b. the banking system has less reserves and the money supply tends to grow. c. the banking system has more reserves and the money supply tends to fall. d. the banking system has less reserves and the money supply tends to fall.
A "specialist" is a
a. stockholder who finds buyers and sellers for specific stocks, but also operates outside of specific stock markets. b. person who works on the floor of the New York Stock Exchange and specializes in certain stocks. c. stockbroker who operates only in a particular regional stock market. d. stockbroker who specializes in the "third market."
Which of the following statements is correct? In the special case of the 100-percent reserve banking the money multiplier is
a. 0 and banks create money. b. 0 and banks do not create money. c. 1 and banks create money d. 1 and banks do not create money.