Describe how a speculator can improve social welfare when he correctly anticipates that future demand will be higher than suppliers expect.
What will be an ideal response?
When a speculator anticipates that future demand will be higher than suppliers expect, he will buy futures contracts (locking in a low price for future delivery of the commodity and intending to sell it at the higher price he expects). These purchases in the futures markets drive up the future spot price expected by suppliers. Suppliers respond by reducing supplies in the present spot market and increasing the amount stored to sell in the future spot market. If the speculator is correct in his expectations, society gains because the speculator has correctly alerted people that the commodity will be more valuable in the future and ought to be conserved in the present.
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________.
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
If a good's demand function is Q = 30 - 3P, then calculate the price elasticity of demand when
a. good price is $3 using the point elasticity formula b. good price is $4 using the point elasticity formula c. good price decreases from $4 to $3, using the arc elasticity formula d. good price is $5, using the point elasticity formula e. good price increases from $4 to $5, using the arc elasticity formula
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a. GDP = Y. b. Y = DI + T + NX. c. GDP = GNP - NX. d. Y = C + I + G + NX.
When a government influences the exchange rate of its currency, it is said to be practicing “dirty floating.”
Answer the following statement true (T) or false (F)