Read Eye on Price Regulation on p. 185 and explain why a mismatch between intention and outcome is inevitable if a price regulation seeks to block the laws of supply and demand
What will be an ideal response?
Price regulations have as their purpose the goal of changing the market outcome. For example, minimum wage laws raise the wage rate paid lower-skilled workers and rent controls lower the rent paid for apartments. In both instances, the law is designed to change the equili-brium price (the wage for the minimum wage and the rent for rent controls) determined by supply and demand. Because the equilibrium price is the only price at which there is neither a shortage nor a surplus, a law that changes the price automatically creates either a shortage or a surplus. In the Eye on Price Regulation, the cap on executive pay would create a shortage of executives.
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Check collection and clearing happen
A) at the bank where the check was written. B) only at private clearing centers. C) at the Fed and at private clearing centers. D) only at the Fed.
When a grocery store accepts your $5 bill in exchange for bread and milk, the $5 bill serves as a
A) medium of exchange. B) unit of account. C) store of value. D) standard of deferred payment.