Suppose that you work for the Federal Reserve. Unemployment is starting to climb and one of your colleagues has presented an argument in favor of increasing the money supply to stimulating spending and reduce unemployment. Present a counterargument of why reducing unemployment could be detrimental to the economy.
What will be an ideal response?
Answers to this question will vary but should include several points of evidence in
support of their argument. For example, stimulating spending can raise the rate of
inflation, especially if the economy is close to full capacity, as firms raise prices in
response to rising demand. Further, it is important to look at what kind of workers are
unemployed and what kind of jobs will be added. If there is a skills mismatch between
the two, this strategy will lead to inefficiencies (underemployment).
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From World War II through 2010, the United States experienced ________ recessions
A) 2 B) 5 C) 11 D) 15
What is the dilemma faced by firms in oligopoly?
What will be an ideal response?
A recessionary gap exists when aggregate demand is above the full employment level of output
a. True b. False Indicate whether the statement is true or false
The dominant Keynesian view of the 1960s and 1970s stressed that
A) changes in government spending and budget deficits can help stabilize an economy. B) the "invisible hand" would be sufficient to lift the economy out of an economic downturn. C) government should avoid budget deficits at all times as they may destabilize the economy. D) both budget deficits and surpluses should be small relative to the size of the overall economy.