In a market-based economy, what is the role of a system of prices?
A. To create abundance and surpluses
B. To make goods and services too expensive.
C. To address the problem of scarcity
D. To create shortages
Answer: C. To address the problem of scarcity
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When the Fed buys U.S. government securities, the money supply
A) increases because there is an increase in transaction deposits at the bank of the bond dealer but there is no decrease in transaction deposits at any other bank.
B) decreases because there is an increase in the reserves of the bond dealer's bank.
C) remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a reduction in transaction deposits at the Fed.
D) remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a fall in transaction deposits at another bank.
The Weber-Fechner law is the relationship according to which the perceived change in any stimulus:
A. depends upon the ease with which it is possible to summon similar changes from memory. B. varies depending upon whether the change triggers loss aversion. C. varies according to the size of the change measured as a proportion of the original stimulus. D. depends upon an initial approximation, which is then updated in accordance with additional information.
An increase in equilibrium quantity will result from each of the following except
A. an increase in supply and an increase in demand. B. an increase in demand and no change in supply. C. an increase in supply and no change in demand. D. a decrease in demand and a decrease in supply.
If you were to use an Aggregate Supply - Aggregate Demand diagram to model nondiscretionary and discretionary fiscal policy in reaction to a positive aggregate demand shock, you would seethe aggregate demand curve move
A. to the right, back toward its pre-shock position as a result of these policies. B. to the left as a result of the shock. C. back toward its pre-shock position as a result of these policies. D. to the right as a result of the shock.