What are transaction costs? What are some ways in which society reduces transaction costs?
What will be an ideal response?
Transaction costs are costs associated with exchanging goods and services. They include information costs associated with finding out price, quality, and other characteristics of the good and the other party in the exchange, and costs of contracting and enforcing the contract. Organized markets, retail stores and shopping malls, advertising, and middlemen are several institutions that have developed to reduce transaction costs.
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When comparing a $100 billion increase in government expenditure to a $100 billion decrease in tax revenue, the effect of the increase in government expenditure on aggregate demand is
A) greater than the effect of the tax decrease. B) equal to the effect of the tax decrease. C) less than the effect of the tax decrease. D) positive whereas the effect of the tax decrease is negative. E) negative whereas the effect of the tax decrease is positive.
Which branch of economics considers that economic agents do not always act rationally?
A) Microeconomics B) Macroeconomics C) Behavioral economics D) Econometrics