Why might economic policies aimed at stabilization actually increase the magnitudes of economic fluctuations?
What will be an ideal response?
Well-timed economic policies can reduce the magnitudes of economic fluctuations. But if the policies are poorly timed, they might work in the opposite direction of the desired outcome. The poor timing can come from lags in implementation, for instance, delay between the time that the policies are implemented and the time they take effect.
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Government purchases have the same multiplier effect as business investment spending.
Answer the following statement true (T) or false (F)
Suppose that for a given firm, the increase in output resulting from the last worker hired is less than the increase in output of the previous worker hired. This is an example of
A) increasing return. B) capital deepening. C) diminishing returns. D) constant returns.
Suppose the market-clearing price of guitars is $500, but the prevailing price is currently $700. Pick the correct statement
A) There is a shortage of guitars. B) Guitar sellers would not be able to successfully sell all they planned to sell. C) Guitar buyers would not be able to successfully buy all they planned to buy. D) All of the above are true. E) None of the above is true.
When actual GDP does not rise as fast as potential GDP, the economy most likely will experience
a. inflation. b. recession. c. economic growth. d. falling unemployment.