Explain how usury laws distort the market for funds. What is the most likely result if a usury law is passed and enforced?
A usury law sets a maximum interest rate which can be charged on loans. Similar to any other price ceiling, it will lead to a shortage (assuming that the maximum rate is below the market equilibrium rate); quantity demanded will exceed quantity supplied at the interest rate. The result will be economic inefficiency. In order to allocate the funds that are available, lenders will be tempted to employ non-price rationing methods. These methods may easily be interpreted as discrimination on the basis of race, gender, etc.
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The short run for the industry is defined as a period
a. too brief for new firms to enter the industry. b. too brief for old firms to leave the industry. c. in which the number of firms in the industry is fixed. d. All of the above are correct.
Which of the following describes an economy?
a. The social arrangement that determines what is produced, how it is produced, and for whom it is produced b. The process that describes the evolution of human society c. The arrangement that determines who governs the people and how they govern the people d. The system by which a state or community is controlled
Which of the following is an assumption on which time series regression is based?
A. A time series process follows a model that is nonlinear in parameters. B. In a time series process, no independent variable is a perfect linear combination of the others. C. In a time series process, at least one independent variable is a constant. D. For each time period, the expected value of the error ut, given the explanatory variables for all time periods, is positive.
When income rises
A. quantity of a normal good demanded rises. B. demand for a normal good rises. C. demand for a luxury good falls. D. demand for an inferior good rises.