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Oikinomia quiz 7

Terms in this set (20)

A competitive capital market is important to society because it directs resources towards projects that
Are valued more highly than their cost
A legal system that protects private property and enforces contracts in an even-handed manner helps promote economic growth because it
Provides people with a strong incentive to supply others with things that they value at an economical price
In a market economy persons undertaking an investment project must
Either personally supply the required funds or convince other investors to do so
Private entrepreneurs are likely to make better investment decisions than central planners because
Entrepreneurs who make mistakes must bear the costs of the mistakes personally
The policies of Fannie Mae and Freddie Mac during 1995 to 2008 encourage mortgage originators to
Loosen lending standards and extend more loans to low income and sub prime borrowers
Fannie Mae and Freddie Mac held a competitive advantage over other lenders primarily because
They could borrow funds cheaper than other lenders because their bonds were perceived to be backed by the federal government
What must a nation do to achieve and sustain a high rate of economic growth?
Have a mechanism capable of attracting savings and channeling them into wealth creating projects
Why would you question the validity of the statement: "because Walmart is a low wage firm it exploits its workers" ?
No one is required to work for Walmart and therefore it must attract workers by paying them more attractive wages than they would earn elsewhere
What contributed to soaring housing prices of 2002 to 2005 ?
Regulations designed to make housing more affordable increased the demand for housing and drove housing prices upward
Is compared to a barter economy money of stable and predictable value will
Reduce transaction cost and increase the volume of trade
What is the best definition of money?
Anything that widely serves as a medium of exchange, unit of account, and store of value
What reduces the purchasing power of the dollar?
Inflation
When the inflation rate is high and volatile
Investment is riskier and gains from trade are reduced
The most frequent reason for printing more money
Is the existence of an unbalanced budget
If the fed is going to create an environment for economic progress it should focus on
Keeping interest rates low
Most economists believe the severity and duration of the great depression was primarily the result of
Manipulation of the money supply by the fed
How do government bail outs impact the economy?
They hurt the economy by rewarding reckless private and state spending thereby encouraging more of it
Where John Maynard Keynes argued that markets were inherently unstable necessitating government intervention Frederick Hayek maintained
The economy was far too complex for experts and government planners to manage
Is the Smoot Hawley tariff was passed in order to
Force Americans to buy more American goods which theoretically would increase jobs
What was a result of the agricultural adjustment act , the national industrial recovery act and the numerous other programs introduced as part of the new deal?
A business environment of uncertainty that reduced output and investment
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