Explain how low levels of living can turn into a vicious cycle in developing countries
What will be an ideal response?
See the section on low levels of living in the chapter.
You might also like to view...
The definition of efficiency implies that production is carried out on the production possibilities frontier.
Answer the following statement true (T) or false (F)
Suppose that price is below the minimum average total cost but above the minimum average variable cost. In the short run, a firm that is a price taker would:
A. immediately shut down and get out of the industry. B. continue to produce a quantity such that marginal revenue equals marginal cost. C. shut down temporarily, in hopes of restarting in the near future. D. cut price and expand output in hopes of achieving economies of scale
Suppose current government spending increases and that individuals expect future government spending to increase. Given this information, in which of the following cases will output in the current period be more likely to increase?
A) Individuals consider only the short run effects of changes in future macro variables when forming expectations of future output and future interest rates. B) Individuals consider only the medium run effects of changes in future macro variables when forming expectations of future output and future interest rates. C) Individuals consider only the long run effects of changes in future macro variables when forming expectations of future output and future interest rates. D) The output effects will be the same in B and C.
During normal times
A. fiscal policy is not effective because of the recognition time lag. B. fiscal policy is very effective because it the effects of fiscal policy will swamp automatic stabilizers and time lags can be. C. fiscal policy can immediately correct problems in the economy. D. automatic stabizers is not effective in affecting real GDP.