In a free market, if the price of a good is below the equilibrium price, then;
A. buyers, hoping to ensure they acquire the good, will bid the price higher.
B. sellers, dissatisfied with growing inventories, will raise their prices.
C. the government will set a higher price to reestablish the market equilibrium.
D. sellers, dissatisfied with growing inventories, will lower their prices.
Answer: A
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In his book, An Inquiry into the Nature and Causes of the Wealth of Nations, economist Adam Smith argued that individuals
A) always tend to act in an altruistic manner. B) always consider the impact of their actions on the welfare of others. C) are motivated by self-interest. D) are generally not concerned with economic questions.
The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.
Suppose nominal GDP is $14 trillion and the GDP deflator is 122.5. Given this information, what is real GDP?
A. $9.8 trillion B. $13.8 trillion C. $15.2 trillion D. $11.4 trillion
A derivative instrument:
A. is a low-risk financial instrument used by highly risk-averse savers. B. gets its value and payoff from the performance of the underlying instrument. C. should be purchased prior to purchasing the underlying security. D. comes into existence after the underlying instrument is in default.