Consider the following statements:
a. Car owners purchase more gasoline from a gas station that sells gasoline at a lower price than other rival gas stations in the area.
b. Banks do not take steps to increase security since they believe it is less costly to allow some bank robberies than to install expensive security monitoring equipment.
c. Firms produce more of a particular DVD when its selling price rises.
Which of the above statements demonstrates that economic agents respond to incentives?
A) a only
B) b only
C) c only
D) a and b
E) a, b, and c
Answer: E) a, b, and c
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Which of the following is the least tangible?
a. Social capital b. Physical capital c. Human capital d. All of these choices
Why doesn't stabilization policy work, according to economists using the misperceptions theory?
What will be an ideal response?
RBC theory leads to ________ government macro-stabilization policy, due to the theory's assumption of ________
A) a rationale for, slow wage and price adjustment B) a rationale for, continuous market-clearing C) a rejection of, slow wage and price adjustment D) a rejection of, continuous market-clearing
The linkages of the interest-rate-based transmission mechanism of monetary policy are summarized as follows:
A) change in the money supply ? change in speculative balances ? change in transactions balances ? change in planned investment ? change in aggregate demand. B) change in the money supply ? change in planned investment ? change in government spending ? change in aggregate demand. C) change in the money supply ? change in interest rates ? change in planned investment ? change in aggregate demand. D) change in the money supply ? change in interest rates ? change in transactions balances ? change in government spending ? change in aggregate demand.