Suppose the prices of petroleum products, including gasoline and fuel oil, fell sharply. Which of the following would most likely occur as the result of the lower prices of petroleum products?
a. A reduction in the consumption of gasoline.
b. An increase in demand for solar heating systems.
c. An increase in demand for smaller, more efficient automobiles.
d. A reduction in the demand for home insulation products.
d
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The deadweight loss associated with producing a product that has an external cost occurs because
A) too much output is produced. B) too little output is produced. C) the price that firms charge for the good is too high. D) not enough resources are allocated to producing the good. E) the marginal social cost does not equal zero.
Liquidity provision and asset purchase may not be enough to stimulate the economy unless the these policy actions are able to
A) lower the real interest rate for investments. B) lower the short-term real interest rate. C) raise the policy rate above zero. D) lower the policy rate.