Describe the debt-deflation process
What will be an ideal response?
As banks are forced to sell assets, the price of the assets decline, causing others who hold these assets to suffer a decline in net worth, which may result in other banks and investors going bankrupt. The process repeats itself. This worsens the economic downturn, resulting in deflation.
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A good for which demand decreases when income decreases is known as a(n) ________ good
A) normal B) inferior C) complementary D) substitute
Explain the concept of liquidated damages with an example
A . Explain why paper money doesn't have to be backed by gold or other valuable goods in order to be valuable. b. Is there a disadvantage to using fiat money? Explain
Because smoking causes illness and disability to smokers, society must maintain more health-service capacity than it would need in the absence of smoking. Since the cost of maintaining this capacity is covered to a substantial degree by health insurance, even nonsmokers must pay higher premiums. Also, smokers hurt nonsmokers as a result of "passive smoke." The Rand Corporation estimates these
costs to be 29 cents per pack of cigarettes. Cigarette taxes average 37 cents per pack. Based on the economist's definition of efficiency, it follows that a. cigarette taxes are too high, and cigarette production is lower than the efficient amount. b. cigarette taxes should be increased until external costs are zero. c. since the tax exceeds the marginal cost, we have a better than efficient outcome. d. we are overconsuming cigarettes.