1.The two basic markets shown by the simple circular flow model are:
product and resource
free and controlled
household and business
capital goods and consumer goods
2. Countercyclical discretionary fiscal policy calls for:
surpluses during both recessions and periods of demand-pull inflation
deficits during both recessions and periods of demand-pull inflation
surpluses during recessions and deficits during periods of demand-pull inflation
deficits during recessions and surpluses during periods of demand-pull inflation
3. Because the federal government typically provides disaster relief to farmers, many farmers do not buy crop insurance even through it is federally subsidized. This illustrates:
the moral hazard problem
the special interest effect
the adverse selection problem
logrolling
4. A monopolistically competitive industry combines elements of both competition and monopoly. The monopoly element results from:
the likelihood of collusion
mutual interdependence
product differentiation
high entry barriers
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