Under a pure price system, the decision of resource allocation is made by
A) the head of the government.
B) those who have the right to vote in government elections.
C) individuals who own the resources.
D) no one.
Answer: C
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When the cost of borrowing funds which is stated on a loan is adjusted for the effects of inflation, the resulting interest rate is called the
A) prime interest rate. B) nominal interest rate. C) real interest rate. D) core PCE interest rate.
A financial services company offers to pay you $1,000 a year for life in exchange for $20,000 today. What factors affect your decision to take this offer?
What will be an ideal response?
Adverse selection in insurance requires that
a. all people face the same risk b. potential customers facing more risk are no more interested in purchasing insurance c. people are not risk averse d. insurers cannot tell higher risk people from lower risk people
The paradox of excessive consumption argues that when households spend all they earn,
a. actual output and potential output will be in equilibrium. b. the financial anxiety of families will be low. c. the economy will achieve rapid, sustainable growth. d. consumption can stagnate because families are in a poor position to deal with increases in debt and financial setbacks.