In a market characterized by many sellers, assume that transaction costs for both buyers and sellers are both costlessly cut to zero. What will happen to total economic value?
a. Economic value will remain unchanged because the decrease in consumer surplus will offset the increase in producer surplus.
b. Economic value will remain unchanged because the decrease in producer surplus will offset the increase in consumer surplus.
c. Economic value will certainly increase but its magnitude will depend on the initial transaction costs of the market participants.
d. Economic value will certainly decrease but its magnitude will depend on the initial transaction costs of the market participants.
C
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The most volatile component of aggregate demand is
A. consumer spending. B. government purchases. C. net exports. D. investment spending.
Perfect capital mobility mixed with floating exchange rates means that
A) fiscal spending is completely ineffective. B) monetary policy is completely ineffective C) neither fiscal nor monetary policy will be effective. D) both fiscal and monetary policies efficiencies will be maximized.
According to rational expectations theory, forecast errors of expectations
A) are more likely to be negative than positive. B) are more likely to be positive than negative. C) tend to be persistently high or low. D) are unpredictable.
Law of comparative advantage
What will be an ideal response?