What two factors affect the legal-institutional environment? Discuss the effect of changes in the legal-institutional environment on aggregate supply.
What will be an ideal response?
Included as factors related to the legal-institutional environment are business taxes and business subsidies, and government regulation. If business taxes increase, business subsidies decrease, or government regulations increase, these changes increase the cost of doing business. As a consequence, aggregate supply will likely decrease. If business taxes decrease, business subsidies increase, or government regulations decrease, these changes decrease the cost of doing business. As a consequence, aggregate supply will likely increase.
You might also like to view...
Using the table, Fred's marginal cost of the 200th slice of pizza is
A) $2.50. B) $6. C) $0.50. D) $20.
If, due to a recession, foreign workers begin to leave the United States to search for temporary work in their home countries until the recession has ended, this will
A) move the home country's economy up along a stationary short-run aggregate supply curve. B) shift the short-run aggregate supply curve of the home country to the left. C) shift the short-run aggregate supply curve of the home country to the right. D) move the home country's economy down along a stationary short-run aggregate supply curve.
Each member of the Federal Reserve's Board of Governors is appointed for life
a. True b. False Indicate whether the statement is true or false
To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.