When the free market produces less than the socially optimal quantity of a good,
a. negative externalities must be present
b. marginal social cost must exceed marginal private cost
c. marginal private benefit must exceed marginal social benefit
d. the government should tax production of the good
e. there has been a market failure
E
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Expansionary fiscal policy crowds out both domestic investment and net exports
Indicate whether the statement is true or false
Which of the following arguments is often used by opponents of Federal Reserve independence?
A) Independence slows the policy decision process. B) Independence causes inflationary pressures to build because of excessive monetary growth. C) Independence leads to conflicts between monetary and fiscal policy. D) Independence causes a concentration of financial power.
Suppose that in 2008, Ford sold 500,000 Mustangs at an average price of $18,800 per car; in 2009, 600,000 Mustangs were sold at an average price of $22,500 per car. These statements:
A. suggest that the demand for Mustangs decreased between 2008 and 2009. B. suggest that the demand for Mustangs increased between 2008 and 2009. C. constitute an exception to the law of demand in that they suggest an upsloping demand curve. D. suggest that the supply of Mustangs must have increased between 2008 and 2009.
When a Japanese resident buys a good or service from a U.S. producer, there is a(n)
A) increase in the supply of yen in the foreign exchange market. B) decrease in the supply of yen in the foreign exchange market. C) increase in the demand for yen in the foreign exchange market. D) decrease in the demand for yen in the foreign exchange market.