Is an efficient market allocation fair? Explain.
What will be an ideal response?
It is not generally possible to define fairness when considering efficiency. Instead, economists focus on efficient outcomes. Markets respond to demand, which is based upon willingness and ability to pay. Therefore, persons with high income and high wealth get attention, and their desires are met in markets. Others must do without. Many see this as unfair, because “needs” are not addressed.
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If the Fed wants to shift toward a more expansionary policy, it often announces that it is going to change the federal funds interest rate. The Fed controls the federal funds interest rate
a. by imposing legal restrictions that prohibit exchanges at interest rates other than the ones designated by the Fed. b. by having the U.S. Treasury fix this interest rate c. through its policy of open market operations. d. by altering the size of the federal budget deficit or surplus.
Monopoly pricing reduces consumer surplus.
Answer the following statement true (T) or false (F)
Veronica deposited $1,000 into an account two years ago. The first year she earned 7 percent interest; the second year she earned 5 percent. How much money does Veronica have in her account today?
a. $1,133.31 b. $1,120.00 c. $1,123.50 d. None of the above are correct to the nearest cent.
When economists refer to capital flight, they are speaking of an:
A. outflow of financial capital from a certain country. B. outflow of real capital from a certain country. C. outflow of financial and real capital from a certain country. D. outflow of human capital from a certain country.