The explanation for the law of demand begins with
a. a small number of wants satisfied by scarce resources
b. finite wants satisfied by infinite resources
c. unlimited wants confronting scarce resources
d. unlimited wants matching up with unlimited resources
e. prices acting as signals to existing and potential suppliers
C
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Explain the dilemma that supply shocks pose when the Fed chooses to use monetary policy to achieve its goals
What will be an ideal response?
Under fiscal stabilization policy in the New Keynesian model, after a negative shock to output,
A) the government increases expenditures and the central bank increases the money supply. B) the government increases expenditures and the central bank decreases the money supply. C) the government decreases expenditures and the central bank increases the money supply. D) the government decreases expenditures and the central bank decreases the money supply.