According to the traditional (crowding-out) view, what impact do budget deficits have on the economy?
Since the government has to issue bonds to finance the deficit, individuals who hold those bonds will perceive them as wealth and will begin to consume more and save less. Interest rates will rise, crowding out private investment and eventually reducing the capital stock that the country has to work with. Also, higher interest rates will attract foreign investors, thereby, appreciating the dollar on the foreign exchange market and leading to trade deficits.
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The idea that in the market system, consumers ultimately decide which goods and services firms will produce is known as
A) socialism. B) monopolistic competition. C) consumer sovereignty. D) institutional competition.
In the late 2000s, the primary source of external funds for corporations was
A) commercial paper. B) loans. C) bonds. D) stocks.
Over the last few years, demand for DVDs has increased, and yet their equilibrium price has fallen. Which of the following best explains this situation?
a. When the price falls, the quantity supplied increases. b. There has been a shortage of DVDs. c. The supply of DVDs must have decreased. d. The demand curve for DVDs slopes upward, so an increase in demand leads to a lower price. e. The supply of DVDs must have increased more than the demand for DVDs increased.
In the short run, if a firm produces nothing, total costs are zero
a. True b. False Indicate whether the statement is true or false