Which of the following is consistent with a political and legal framework that discourages economic growth?
A. Agricultural prices that are allowed to vary according to market conditions
B. A speedy approval process for new businesses
C. The allocation of bank credit by the government rather than by markets
D. Taxation and regulation that are not very burdensome
Answer: C
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Governments grant patents to encourage
A) low prices. B) firms to form public enterprises. C) research and development on new products. D) competition.
Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:
a. earn an economic profit. b. continue to operate in the short run. c. shut down. d. all of these are true.
David Ricardo discovered that two countries can still gain by trading even if one country is more efficient in the production of every commodity. Ricardo's discovery is called the law of
a. comparative advantage. b. absolute advantage. c. compensating balances. d. increasing returns.
Which of the following is an example of a normative - as opposed to a positive - statement?
a. The discount rate is the interest rate the Federal Reserve charges banks to borrow funds. b. The US income tax rate increases with the amount of income earned. c. The government should increase the tax on gasoline. d. The US unemployment rate increased to 10 percent in 2009.