Why is the supply of loan able funds not perfectly inelastic? (In other words, why is the supply curve up sloping?)
What will be an ideal response?
The supply of loan able funds is not perfectly inelastic because as the interest rate increases there is an incentive for households to save more. Thus, at higher interest rates, households will supply more loan able funds and at lower interest rates, they will supply fewer loan able funds. This produces the up sloping curve for the supply of loan able funds.
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In which of the following market structures does a seller have NO market power?
A) Monopoly B) Oligopoly C) Perfect competition D) Monopolistic competition
Price ceilings will likely
a. result in the accumulation of surpluses. b. increase the volume of transactions as we move along the demand curve. c. increase production as producers respond to higher consumer demand at the low ceiling price. d. result in the development of black markets.
In the long run, a perfectly competitive firm will react to profits by _____
a. improving the quality of its products b. increasing the price of the good it produces c. reducing its labor inputs d. increasing its level of output
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher