Suppose the economy is suffering in a recessionary period. Firms are facing increasing inventories and individual consumers are increasing their saving to prepare for hard times ahead. What is likely to happen to the economy and can it correct itself and grow toward full employment in the short run?
What will be an ideal response?
The Keynesian view of the economy would conclude that the economy would remain in a recession and would not automatically correct itself. In fact, the economy may fall further into recession if businesses cut investment and consumers continue to increase saving, thus cutting consumption spending. Apart from a significant fall in the price level, no automatic forces exist to pump up the economy toward full employment in the short run.
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An economist who would most likely use active policy making would support which of the following conclusions?
A) Demand shocks have little or no short-run effects on real Gross Domestic Product (GDP) and unemployment. B) Pure competition is not typical in most markets. C) Price flexibility is common in most markets. D) Supply shocks explain most business cycles.
Collateral is ________ the lender receives if the borrower does not pay back the loan
A) a liability B) an asset C) a present D) an offering
In markets, information about the relative value of resources is communicated through: a. government agencies. b. planning committees. c. prices
d. unions.
Suppose the world was on the gold standard. If Japan ran persistent trade surpluses,
A. Japan's money supply would increase. B. Japan would experience inflation. C. Japan's exports would fall. D. All of the choices are true.