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Why isn’t money considered capital in economics? Which of the following are microeconomic issues? Which are macroeconomic issues?

a. How will an increase in the price of Coca-Cola affect the quantity of Pepsi Cola sold?
b. What will cause the nation’s inflation rate to fall?
c. How does a quota on textile imports affect the textile industry?
d. Does a large federal budget deficit reduce the rate of unemployment in the economy? Explain

1 Answer

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Final answer:

Money is not considered capital in economics because it is not a productive resource. The microeconomic issue is the impact of the price change of Coca-Cola on the quantity of Pepsi Cola sold.

Step-by-step explanation:

In economics, money is not considered capital because capital refers specifically to the physical assets used in production, such as machinery, buildings, and equipment. Money, on the other hand, is a medium of exchange and a store of value. It is used to facilitate transactions, but it is not itself a productive resource.

The microeconomic issue among the provided options is a. How will an increase in the price of Coca-Cola affect the quantity of Pepsi Cola sold? This is a microeconomic issue because it focuses on the interaction between individual firms in a specific market.

The macroeconomic issues among the provided options are b. What will cause the nation's inflation rate to fall? and c. How does a quota on textile imports affect the textile industry? These are macroeconomic issues because they involve the broader impacts on the entire economy and various sectors.

d. Does a large federal budget deficit reduce the rate of unemployment in the economy? is not a clear-cut microeconomic or macroeconomic issue as it involves both factors. A large federal budget deficit can have macroeconomic impacts on the overall health of the economy, but it also has potential microeconomic effects on unemployment, depending on the specific policies implemented.

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