According to the monetarists, what is the main cause of macroeconomic instability?
What will be an ideal response?
Monetarists cite inappropriate monetary policy as the most important cause of macroeconomic instability. They argue, for example, that an increase in the money supply increases aggregate demand, which if the economy is at the fully employed level increases the price level. Higher prices then cause firms to increase their real output and employment falls. However, once nominal wages account for inflation, production will decrease back to its full employment level and employment will decrease back to its natural rate.
The opposite happens from a decrease in the money supply. This reduces aggregate demand and real output falls, putting employment below its natural rate. However, when wages adjust to the lower price level, output and employment return to their full-employment levels.
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The concept of a market is a
A. place where sellers increase their wealth. B. store. C. location where buyers and sellers meet to negotiate prices and determine quantities traded. D. group of buyers and sellers of a good or service.
The industry concentration ratio measures the
A) value of the assets owned by the largest corporations in the market. B) percentage of industry sales accounted for by the top four or eight firms. C) difference between price and marginal cost for the largest firms in the industry. D) degree of product differentiation in the market.
In the labor negotiation game:
a. The payoffs from bargaining hard are only higher if your opponent accommodates b. The payoffs from bargaining hard are only higher if your opponent bargains hard c. The payoffs are always higher if you bargain hard d. The payoffs are always higher if your opponent bargains hard
Is the firm a perfect competitor or an imperfect competitor?
