What is meant by the concept of a “coordination failure” in macroeconomics?
What will be an ideal response?
When individual members of an economy respond to signals on prices, output, employment, and spending, they may act in such a way as to make the macroeconomic situation worse. For example, a businesswoman in a recession notices that she has unsold products. She must lay off workers to cut payroll expenses. If this behavior is generalized throughout the economy, more workers will be laid off and demand for other businesspersons’ output will decrease as well, leading to a deepening recession.
You might also like to view...
Which of the following is not part of the Federal Reserve System?
a. the Federal Advisory Council b. the Federal Open Market Committee c. the Council of Economic Advisers d. the Conference of Presidents of the Reserve Banks
Oligopolistic firms never collude because they have almost no incentive to do so
a. True b. False Indicate whether the statement is true or false
Which of the following factors does not affect the value of a worker's marginal product?
a. discrimination against a particular group of workers by a firm's customers b. a worker's level of disposable income c. a worker's level of human capital d. compensating wage differentials
Recall the Application about the price competition between satellite and cable TV services to answer the following question(s).Recall the Application. In most cases where satellite TV service is introduced in an area with cable TV service, if the price of cable TV decreases, then consumer surplus (in the cable TV market):
A. increases. B. decreases. C. drops to zero. D. becomes negative.