According to classical economists, the price level will remain unchanged as long as the growth rate of M equals
a. the growth rate of Q
b. the growth rate of P
c. the growth rate of V
d. the inflation rate
e. zero
A
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Scatterbrain Samantha often forgets to lock her house. This has caused the probability of a burglary to be 30%. If her house gets broken into, she faces a property loss of $10,000, otherwise she gets to keep her $100,000 . What is the minimum price an insurance company could offer (if it had no other costs)?
a. $10,000 b. $3,000 c. $100,000 d. $5,000
Higher prices can discourage use/consumption, which in turn may better allocate scarce resources.
Answer the following statement true (T) or false (F)
Which one of the following statements is FALSE?
A. The relative price of a good is its price measured relative to the price of other goods. B. When the price of beer goes up by the same proportion as the prices of all other goods, the relative price of beer does not change. C. The nominal price of a good is its price measured in current dollars. D. Generally, what matters most to consumers is what a good costs in dollars.
Firm A finds it very expensive to reduce its sulfur dioxide emissions, while Firm B finds it very cheap to reduce its sulfur dioxide emissions. If a program of tradable pollution permits was enacted, we would most likely see
A. Firm A reduce its emissions by more than Firm B. B. Firm B sell its permit to pollute to firm A. C. Both firms decrease their sulfur dioxide emissions by the same amount. D. Both firms increase their sulfur dioxide emissions by the same amount.