How do we know when a market is contestable?
What will be an ideal response?
A market is contestable when barriers to entry are low. Economic profits encourage new entrants into a market. If they can succeed, then the market is contestable and the market power of the incumbent firm will be diminished.
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The four components of aggregate expenditure are
A. consumption, investment, government transfers, and net interest. B. spending on durable goods, inventory investment, government debt, and net exports. C. spending on domestic goods, domestic services, foreign goods, and foreign services. D. consumption, investment, government purchases, and net exports.
The most commonly used tool by the Federal Reserve to control the monetary base is
a. changes in the discount rate. b. changes in tax rates on commercial banks. c. changes in legal required reserve ratios. d. open market operations.
The consumer price index and the GDP deflator are two alternative measures of the overall price level. Which of the following statements about the two measures is correct?
a. The two measures are constructed differently, but they always indicate the same inflation rate. b. The substitution bias applies equally to both measures. c. A change in the price of Korean televisions is reflected in the U.S. consumer price index but not in the U.S. GDP deflator. d. All of the above are correct.
Higher saving is associated with
a. a larger capital stock and higher productivity. b. a larger capital stock but not higher productivity. c. higher productivity but not a higher capital stock. d. neither a higher capital stock nor higher productivity.