Explain how the "invisible hand" makes sure that markets reach equilibrium more quickly than they would if the government sets prices for goods.
What will be an ideal response?
The "invisible hand" is always adjusting the market price for goods. Suppose that people's demand for heating oil goes up. Producers notice that they are running out of oil and immediately increase their activities and raise price to compensate them for the extra work. If the government set a price for heating oil, when demand rose the first thing the government would have to do is appoint a panel of experts to study the problem. The free market would have "fixed the problem" long before the panel of experts could be appointed.
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One example of a microeconomic question is, "Should unemployment benefits be increased?"
Indicate whether the statement is true or false
When 1983 is the CPI base year, the CPI value is 82.4 for 1980 and 172.2 for 2000. Suppose we want to convert this CPI series to have a base year of 2000 (that is, CPI2000 = 100). What is the value of the revised CPI for 1980?
A) 172.2 B) 100 C) 47.9 D) 209.0
An elastic supply is one in which the elasticity is greater than:
a. two. b. four. c. one. d. three.
Government expenditures are different from the government national income account (G) in that:
A. government expenditures includes transfer payments while G does not. B. government expenditures are net of tax revenue while G is not. C. G includes transfer payments while government expenditures does not. D. G includes spending for defense, highways, and education while government expenditures does not.