Why is a period of stagflation part of the normal aftermath of a period of excessive aggregate demand?
What will be an ideal response?
When aggregate demand is excessive, the economy will temporarily produce beyond its normal capacity. Labor markets tighten and wages rise. Machinery and raw materials may also become scarce and so start rising in price. Faced with higher costs, business firms quite naturally react by producing less and charging higher prices, thus giving rise to stagflation. It is the conjunction of inflation and economic stagnation.
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A higher rate of saving at the national level will, in the long-run ________
A) cause a decrease in levels of capital and output B) have no effect on levels of capital and output C) lead to an increase in population growth D) cause an increase in levels of capital and output
A jar has 20 red jelly beans and 40 black jelly beans. If you pick a red jelly bean and put it back, what are the odds of picking a black jelly bean next?
A) 20/40 B) 20/60 C) 40/60 D) 1 (100%)
A direct or positive relationship exists between a country's
a. productivity and its standard of living. b. amount of government spending and its productivity. c. total population and its average citizen's income. d. rate of population growth and the extent of its trade with other countries.
When it comes to voting in a presidential election, we would expect, ceteris paribus,
A) a lower percentage of eligible voters will vote if the weather is bad and this makes it harder to get to the polls on election day (than would have voted if the weather was good). B) a higher percentage of eligible voters will vote if the weather is bad on election day (than would have voted if the weather was good). C) many people to vote who are rationally ignorant. D) a higher voter turnout in the North than in the South. E) a and c