According the Coase Theorem, the private sector can achieve social efficiency if the government:
a. establishes and enforces property rights.
b. imposes taxes to serve as proxies for external costs.
c. set rigorous environmental standards.
d. encourages competition with antitrust laws.
QUESTION 2The Reserve Bank of Glassen is the apex banking institution in the country of Glassen. Money supply in Glassen will increase when:
a. the Reserve Bank of Glassen buys bonds from commercial banks.
b. the Reserve Bank of Glassen raises the required reserve ratio for commercial banks.
c. the Reserve Bank of Glassen sells government bonds to commercial banks.
d. the Reserve Bank of Glassen raises the discount rate for commercial banks.
e. the Reserve Bank of Glassen prints new checks.
QUESTION 3The Coase theorem says that, if the appropriate property right is assigned to ____, an efficient solution to an externality problem will be achieved.
a. the party causing the externality
b. the victim of the externality
c. the party that can avoid the externality at the higher cost
d. either one of the parties involved
QUESTION 4The aggregate output demanded for a given price level occurs at the point where:
a. an economy reaches the full employment of labor.
b. aggregate expenditure equals real GDP.
c. actual aggregate expenditures exceeds real GDP.
d. inventories of goods and services are increasing.
e. inventories of goods and services are decreasing.
QUESTION 5The banking system creates money in the sense that it:
a. prints money.
b. creates excess reserves from loans.
c. creates loans from excess reserves.
d. creates required reserves from loans.
e. creates loans from required reserves.