Why do price levels increase when government adopts fiscal or monetary policy to correct the economy when it faces a recession and high unemployment?
Recession and unemployment are often caused by insufficient aggregate demand. Policy makers can use monetary and fiscal policy tools to stimulate aggregate demand during recession. The aggregate demand curve will shift to right leading to an increase in general price levels.
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The law of diminishing returns makes it clear that as more a variable input is employed, in the ________ the marginal product of the variable input eventually will ________
A) short run; rise B) long run; rise C) short run; fall D) long run; fall
Refer to Figure 3-8. The graph in this figure illustrates an initial competitive equilibrium in the market for apples at the intersection of D1 and S2 (point B). Which of the following changes would cause the equilibrium to change to point C?
A) a positive change in the technology used to produce apples and decrease in the price of oranges, a substitute for apples B) an increase in the wages of apple workers and an increase in the price of oranges, a substitute for apples C) an increase in the number of apple producers and a decrease in the number of apple trees as a result of disease D) a decrease in the wages of apple workers and an increase in the price of oranges, a substitute for apples
What is the law of diminishing marginal product? What causes it?
For an inferior good:
a. the income elasticity is positive. b. the income elasticity if negative. c. the income elasticity is zero. d. the income elasticity is unity.