How do subsidies distort trade patterns and lead to inefficiencies?
With subsidies, producers will export goods not because their costs are lower than those of a foreign competitor but because their costs have been artificially reduced by government action, transferring income from taxpayers to the exporter. The subsidy does not reduce the amounts of actual labor, raw material, and capital costs of production?society has the same opportunity costs as before. The nation's taxpayers end up subsidizing the output of producers who, relative to producers in other countries, are inefficient.
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Recessions are typically
A) unintended and disruptive. B) easy to predict in advance. C) the result of non-monetary disturbances. D) events economists have a hard time explaining.
The market price for a final good reflects
A) the objective value of the good. B) the values added by earlier stages of production. C) the seller's profit. D) the buyer's loss. E) both C and D.
If a bank has excess reserves of $4,000 and demand deposit liabilities of $100,000, and if the reserve requirement is 15 percent, then the bank has actual reserves of
A) $17,000. B) $19,000. C) $24,000. D) $29,000.
Grace and Will are moving to LA at the same time and both wish to find apartments to rent. Grace is staying with her aunt for free while Will is paying to stay at a motel. If their search costs are otherwise identical, one can predict that:
A. Grace will spend more days searching than Will. B. Will will have better information. C. Will will spend more days searching than Grace. D. Grace and Will will spend the same number of days searching.