One difficulty in using voluntary transactions to internalize externalities is that
A) people are motivated by self-interest and are often unwilling to engage in a transaction that might make another person better off.
B) the government usually will not enforce contracts of this type.
C) transaction costs of coming to an agreement can be very large when numerous people are involved.
D) people usually don't understand what the real opportunity costs are that they face.
C
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Explain the relationship between real GDP and potential GDP during the two phases of the business cycle
What will be an ideal response?
The main argument in favor of Fed independence is that
A) interest rates would probably be lower if Congress controlled the Fed; thus hurting savers. B) the Constitution requires it. C) monetary policy is too important and too technical to be determined in the political arena. D) congressional control of the Fed was tried during the 1960s and did not work well.