Consider a simple exchange economy where the marginal rate of transformation between two goods is greater than the marginal rate of substitution for the same goods. Can Pareto equilibrium be derived?
What will be an ideal response?
It is possible to pick points along the PPF that have an MRT that matches equilibrium set of
MRS. Mathematically, it can be very difficult and sometimes impossible to find.
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One of the risks of maturity transformation is that:
A) it can increase the rate of inflation. B) it reduces the profitability of banks. C) it can lead to bank runs. D) it discourages savings.
Which of the following statements is true?
A) Technological innovation can cause wages to fall for some workers. B) Technological innovation increases wages for all workers in an economy. C) Technological innovation always leads to unemployment in the economy as a whole. D) Technological innovation reduces the demand for goods and services in an economy.