The "invisible hand" using Adam Smith's terminology refers to:
a. "behind-the-scenes" policy making to influence how markets allocate scarce resources.
b. market forces working through the price mechanism.
c. the money supply that serves to keep the economy working smoothly.
d. government control of the market.
e. the role of innovation in maintaining a steady rate of growth.
b. market forces working through the price mechanism.
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Monetarism is a school of thought put forth by Milton Friedman. He argued that the economy would most likely
A) be unstable. B) be at potential GDP. C) be above potential GDP. D) be below potential GDP.
A price floor influences the outcome of a market if it is ______
A. set below the equilibrium price B. set above the equilibrium price C. an incentive for buyers to increase demand for the good D. an incentive for sellers to decrease supply of the good
The change in consumption divided by a change in income is defined as:
a. the marginal propensity to consume. b. autonomous consumption. c. the consumption function. d. Keynes' absolute income hypothesis. e. transitory consumption.
If the price of walnuts rises, many people would switch from consuming walnuts to consuming pecans. But if the price of salt rises, people would have difficulty purchasing something to use in its place. These examples illustrate the importance of
a. the availability of close substitutes in determining the price elasticity of demand. b. a necessity versus a luxury in determining the price elasticity of demand. c. the definition of a market in determining the price elasticity of demand. d. the time horizon in determining the price elasticity of demand.