If the government wanted to reduce interest rates without changing output, it should
a. increase consumption and reduce the money supply.
b. increase the money supply and raise government spending.
c. increase the money supply and raise taxes.
d. both b and c.
C
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In the circular flow model, producers
A) and households spend earnings from resource sales on goods and services in the factor market. B) spend earnings from resource sales on goods and services in the product market. C) sell goods and services in the input market. D) hire resources sold by households in the factor market.
Suppose a plaintiff hires a lawyer to represent her in a court case. The lawyer will receive a share of the settlement if the plaintiff wins. Under this contract
A) efficiency cannot be achieved. B) the client bears all of the risk. C) the lawyer bears all of the risk. D) the risk is shared.
Suppose Dean has season tickets for the University of North Carolina men's basketball games. He paid $2,000 for the season tickets. One February afternoon, Dean is very excited about going to the UNC vs. Duke game because of the traditional rivalry between the two teams. Unfortunately, his wife invited several friends over for an evening dinner party and tells Dean he needs to stay home and help her clean the house in preparation for the guests. Dean very much wants to go to the game, but knows he will have to face the wrath of his wife if he does. In his defense, Dean states "I already paid for the game! I have to go or it will be a waste of money." Explain why Dean's reasoning is incorrect.
What will be an ideal response?
The use of government to supplant market outcomes is called
A) market failure. B) rent seeking. C) free riding. D) efficiency.