Briefly explain the effect of pursuing expansionary policy during a time of full employment.
What will be an ideal response?
Expansionary fiscal policy will increase aggregate demand, leading to an increase in the price level and a new output level beyond potential output. This higher output level cannot be sustained as workers and other suppliers adjust their expectations to the higher price level. That is, workers and other input suppliers realize the price they are paying for products (the output price) is rising faster than input prices and consequently demand higher wages and prices for their inputs—shifting the short-run aggregate supply curve leftward. The price level is pushed up as workers and other input suppliers adjust their inflationary expectations. In short, expansionary fiscal policy increases the price level but has no long-run effect on real GDP.
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Which of the points show efficient production points?
A) all points above the TP curve B) all points on the TP curve C) all the darkened points below the TP curve D) all the points above and on the TP curve E) all the darkened points below and on the TP curve
For a good where network externalities are present, having an early lead in the race for customers may be the only lead necessary to ultimately win the race for dominance in the good's market.
Answer the following statement true (T) or false (F)
Relative to a no-international-trade initial situation, if the United States had a comparative advantage in wine production and exported wine, the U.S. domestic price of wine:
a. would rise, but domestic output would fall. b. would fall, but domestic output would rise. c. would rise, and domestic output would rise. d. would fall, and domestic output would fall.
The unit-of-account costs of inflation are the costs resulting from the way in which inflation makes money a less reliable unit of measurement
a. True b. False Indicate whether the statement is true or false