Explain how the market for apartments allocates the scarce supply of apartments near the city center
What will be an ideal response?
The free market for apartments resolves the question of who gets to live in the best apartments. The rental price of apartments provides incentives that effectively allocate economic resources. As the price of downtown apartments rises, only workers with the highest opportunity cost of time will be willing to rent them. All other workers will prefer to move further away and accept the consequences of a longer commute.
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The increasing attractiveness of a variety of liquid financial assets has caused the
A) velocity of M1 to rise. B) demand for M1 to rise. C) velocity of M1 to decline. D) supply of M1 to decline.
An increase in aggregate demand will tend to cause which of the following?
A) a deflationary gap B) a recessionary gap C) cost-push inflation D) none of the above