Markets tend to overproduce goods that generate external costs.
Answer the following statement true (T) or false (F)
True
When external costs are present, the price signal confronting producers is flawed because it does not convey the full (social) cost of scarce resources; therefore the market encourages excessive production and pollution.
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In the Keynesian cross diagram, an increase in investment spending because companies become more optimistic about investment profitability causes the aggregate demand function to shift up, the equilibrium level of aggregate output to ________, and
the IS curve to shift to the ________, everything else held constant. A) rise; left B) rise; right C) fall; left D) fall; right
Monetarists view the use of monetary policy to fine-tune the economy as
A) unnecessary because the private sector is inherently stable. B) always inflationary. C) less predictable than fiscal policy. D) impossible because the Fed does not have the tools to control the money supply.
Two random variables are independently distributed if their joint distribution is the product of their marginal distributions
It is intuitively easier to understand that two random variables are independently distributed if all conditional distributions of Y given X are equal. Derive one of the two conditions from the other. What will be an ideal response?
Professor Milton Friedman stated that "inflation is a monetary phenomenon." What did he mean by this statement and what is the basis for this assertion?
What will be an ideal response?