Explain why deflation could prevent people from being able to repay their debts
What will be an ideal response?
When an economy experiences deflation, or falling price levels, wages can actually decline. If someone has an outstanding loan that needs to be paid off, a decrease in wages will make it harder to pay the loan, since outstanding loan amounts will not decrease with deflation and the decrease in wages.
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Suppose the government mandates the installation of a certain type of pollution abatement equipment for the leather tannery industry
For some firms in the industry, installing this equipment may not be the most cost effective method of reducing pollution. Indicate whether the statement is true or false
Suppose there are 11 buyers and 11 sellers, each willing to buy or sell one unit of a good, with values {$14, $13, $12, $11, $10, $9, $8, $7, $6, $5, $4,}. Assume no transaction costs and a competitive market. At the optimal bid-ask spread, how many transactions would the market maker undertake in this market
a. two transacttions b. three transactions c. four transactions d. five transactions
A prudent person is most likely to find the use of financing attractive when purchasing which one of the following items?
A) clothes B) entertainment C) a college education D) rental housing
Which of the following is NOT a characteristic of a typical indifference curve?
A. The curve shows all combinations of goods that give the consumer the same level of utility. B. The curve will shift out if income increases. C. As a consumer has less of a good, he is less willing to exchange less of it for one more unit of another good. D. The marginal rate of substitution is measured by the slope of the tangent to the curve.