Explain the problems giving rise to this statement: “You would think the government would want to do something to improve economic conditions when the economy is in trouble, but the government is slow to act.”
What will be an ideal response?
Fiscal policy is subject to timing problems. There are three timing lags that limit the speed with which fiscal policy can be enacted and effective. First, there is a lag in recognizing the phase of the business cycle to determine when the government might want to provide help. Second, there is an administrative lag in decision-making that involves deciding which specific policies should be adopted. Third, there is an operational lag because the adoption of policies takes time to have an effect on output and employment.
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The pattern of protection in industrial countries is particularly harmful to the interests of
A) low-income developing countries. B) high-income industrial countries. C) Asian nations. D) European nations. E) None of the above.
If the economy is in a long-run equilibrium when the Federal Reserve decides that its inflation target is too low and chooses to raise it, ________
A) it would likely conduct a tightening of monetary policy by raising the real interest rate for any given inflation rate B) it would likely conduct an easing of monetary policy by lowering the real interest rate for any given inflation rate C) it would likely conduct an easing of monetary policy where the real interest rate would increase due to the ensuing decrease in aggregate demand D) it would likely conduct a tightening of monetary policy where the real interest rate would increase due to the ensuing increase in aggregate demand E) none of the above
We assume that in the long run in a perfectly competitive market:
A. the firms can enter or exit. B. the number of firms is fixed. C. the price will be constant. D. collusion will set in without government regulation.
In the circular flow model, the value of total production for an economy ________ the value of total expenditures on final goods and services.
A) equals B) is less than C) may be greater than or less than D) is greater than