In 1989, Hurricane Hugo devastated Charleston, South Carolina, leaving residents with no electricity for light or refrigeration, and completely cut off from the outside world by fallen trees and washed-out roads. Consequently, the price of ice rose 1,000 percent and generators 300 percent. Tree removal firms were charging $4,000 to cut up a single tree. Outraged, the city government enacted an
emergency law prohibiting price "gouging." This law is an example of
a. the cost disease of services.
b. a price ceiling.
c. the laissez-faire rule.
d. the indispensable necessity syndrome.
b
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Goods whose benefits to society are not diminished as more people consume them and whose benefits cannot be withheld from anyone are
a. impossible since resources are limited b. examples of negative externalities c. public goods d. typically food and other necessities e. provided by free markets to free riders
Assume that the expectation of a recession next year causes business investments and household consumption to fall, as well as the financing to support it. If the nation has low mobility international capital markets and a fixed exchange rate system, what happens to the quantity of real loanable funds per time period and real GDP in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls and real GDP falls. b. The quantity of real loanable funds per time period falls and real GDP rises. c. The quantity of real loanable funds per time period rises and real GDP remains the same. d. The quantity of real loanable funds per time period and real GDP remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
In liquidity preference theory, an increase in the interest rate, other things the same, decreases the quantity of money demanded, but does not shift the money demand curve
a. True b. False Indicate whether the statement is true or false
Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods. Can Pareto equilibrium be derived?
What will be an ideal response?