Which of the following is a major problem with deflation?
A) Money loses value so rapidly that economic agents will be reluctant to hold money.
B) Economic agents tend to put off purchases in anticipation of lower prices for goods and services, leading to a downward spiral in economic activity.
C) Low prices for goods and services tend to result in massive shortages in most markets.
D) Money supply cannot keep pace with consumption spending.
Ans: B) Economic agents tend to put off purchases in anticipation of lower prices for goods and services, leading to a downward spiral in economic activity.
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Vertical contracts between manufacturers and retailers often aim to
a. Incentivize the retailers to undertake costly activities, which they otherwise may not realize the full benefits of on their own b. Reward the retailer for undertaking the risk inherent in introducing a new product c. Reimburse the retailer for the cost of managing an extended inventory d. All of the above
A public offer by one company to directly buy the stock of another company is known as
a. a tender offer b. a red herring c. an acquisition contract d. a right of first refusal e. a declaration of sale
Suppose the monopolist only sold the goods separately. What price will the monopolist charge for Good 1 to maximize revenues for good 1?
a. $2,300 b. $2,800 c. $1,200 d. $1,700
In common value auctions
a. Every bidder know the value of the object being sold b. Each bidder makes the same estimate of the value of the good c. All bidders know the estimates of the others d. The true value of the item is common across bidders