What are the tools available to governments to mitigate cycles of boom and bust? Why do these tools fail?
What will be an ideal response?
Some of the tools available to the government constitute what is called fiscal policy: control over taxes and government spending. Others come from monetary policy: control over money and interest rates. Fiscal and monetary policies sometimes fail—for both political and economic reasons. Policymakers do not always make the right decisions. And even when they do, the economy does not always react as expected. Furthermore, it is not always clear what the “right” decision is.
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The assertion that income accrues to people as a consequence of interactions among suppliers and demanders
A) amounts to an endorsement of the existing system. B) amounts to an endorsement of the pattern of income distribution. C) ignores the fact that the interactions are often unfair. D) offers a way of approaching the issue of income distribution.
If Alejandra makes $46,000 per year as a nurse and pays $7,000 in taxes while Emily makes $46,000 per year as a high school teacher and pays $6,500 in taxes, this is an example of
A. Vertical inequity. B. Marginal inequity. C. A flat tax. D. Horizontal inequity.
Inflation is costly only if it is unanticipated
a. True b. False Indicate whether the statement is true or false
If price is lowered by law from the market equilibrium value of $5 to a lower value of $4:
A. producer surplus will decrease and there will be some total surplus lost. B. consumer surplus will decrease and there will be some total surplus lost. C. there will be lost surplus, as both producer surplus and consumer surplus decrease. D. both producer surplus and consumer surplus will increase.