The self-correcting property of the economy means that output gaps are eventually eliminated by:

Taxes cause deadweight losses because they

a. lead to losses in surplus for consumers and for producers that, when taken together, exceed tax revenue collected by the government. b. distort incentives to both buyers and sellers. c. prevent buyers and sellers from realizing some of the gains from trade. d. All of the above are correct.

Which scenario best exemplifies Gresham’s law?

a. Marla has faith in the value of paper money because she knows it can be exchanged for goods and services. b. Hiro prefers to invest his money rather than keep it in physical form or in a deposit account. c. Charlie does not trust banks, so he keeps all his money in the form of physical currency. d. Indira has silver coins she could use to make a purchase, but she prefers to use paper money.