According to the Coase theorem, private parties can solve the problem of externalities if
a. the cost of bargaining is small.
b. the initial distribution of legal rights favors the person being adversely affected by the externality.
c. the number of parties involved is sufficiently large.
d. All of the above are correct.
a
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
The Fed can attempt to increase the federal funds rate by
A) selling government bonds, which increases the money supply. B) selling government bonds, which decreases the money supply. C) buying government bonds, which increases the money supply. D) buying government bonds, which decreases the money supply.
An economic ________ is a simplified version of some aspect of economic life used to analyze an economic issue
A) variable B) model C) market D) trade-off
Refer to Figure 3-1. If the product represented is a normal good, a decrease in income would be represented by a movement from
A) A to B. B) B to A. C) D1 to D2. D) D2 to D1.