What is the supply-side cause of instability according to the mainstream view?
What will be an ideal response?
Besides changes in investment spending that shift aggregate demand, the mainstream view also suggests that aggregate supply shocks also cause instability and result in changes in prices and output. Events such as wars, embargo, and other artificial restrictions of supply cause prices to rise and increase the per-unit production cost. This results in a reduction of aggregate supply, destabilizing the economy and causing cost-push inflation and recession.
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The statement "By the time our grandchildren are born, scarcity will not be a problem" is
A. possible only if technology advances at a great pace. B. true, because we will learn to limit our wants in the future. C. true, because by that time everyone's basic needs will be met. D. false, because people always want more than there is available.
Which of the following statements is false?
A. Some people in society benefit from inflation. B. An individual living on a fixed income is always made worse off as a result of inflation. C. Those individuals receiving welfare benefits have been harmed by inflation because increases in welfare payments have not kept pace with inflation. D. Inflation will have no effect on an individual whose income is indexed to the inflation rate.
When a large amount of output is produced per unit of the input, the input is said to exhibit
A. low productivity. B. marginal productivity. C. derived productivity. D. high productivity.
The non- free trade policy of the United States that affects many poor countries of the world the most is the
A. tariff on imported tires. B. the proposed tariff on steel. C. agricultural subsidies. D. quota on wood products.